Cash flow is the backbone of every business. It describes how cash comes and leaves your company. If you want healthy cash flow, you have to reduce your credit extensions and speed up collections.
Nobody can predict how cash flows through a business. If you understand the way revenues, expenses, credit work, and receivables work, you will always have enough money to run your business.
However, it’s advisable to track your cash flow; otherwise, your business may suffer from credit impairment or bankruptcy.
Sometimes, your business may look so good on paper, but failure to manage the cash flow could head you for disaster. However, if your business is having cash flow issues, you can consider short-term financing.
Short term financing enables you to get funds to handle unforeseen expenses that may come up in the course of doing business. It bridges the gap between bills payment and collecting receivables. Here are two short term financing options to consider;
Business Line Of Credit
A line of credit is similar to credit cards and gives you borrowing flexibility you can’t get in a regular business loan. The exciting aspect of this short term financing option is that it allows you to borrow a certain amount and only pay interest on the portion of the money borrowed.
So, this financing option enables you to borrow and repay funds as you wish. But you must not exceed your credit limit.
Personal Loan
There are instances when your business won’t qualify for a line of credit for specific reasons. It could be that your business doesn’t have collateral or established business credit. Whichever be the reason, a personal loan is another option you can go for.
You are eligible to get a personal loan based on your credit history and income. The lenders may not request for your business details; all they want to know is your credit history.
Always remember that when you opt for a personal loan, it’s your responsibility to repay the loan. It doesn’t matter if your business succeeds or not; you still have to pay. Otherwise, it will affect your credit score.