Running a business can get expensive, especially when cash doesn’t flow as smoothly as you anticipated.
When short-term business crises develop, you might need access to fast funds. Use the following four strategies to get your hands on essential cash so your business stays afloat.
Borrow From Family or Friends
The Bank of Mom and Dad can come in handy when you have short-term business needs. If your parents or other relatives have extra cash, they might express willingness to help you stay on your feet. Just make sure you write out a formal contract that states how much money you received, when you’ll pay it back, and how much interest your folks will charge, if any. That way, you don’t risk spoiling your relationship.
You can take this same strategy with friends, but be careful not to put a pal on the spot. Start by letting your friend know that you won’t hold a grudge if he or she says no, whatever the reason. You could also start the conversation by asking for advice instead of requesting a loan. Your friend might offer the cash, which could spare you both an awkward conversation.
You might have to part with some of your assets if you’re facing a cash-flow crisis. Scour your office or work site for equipment, merchandise, and other items you don’t need for daily operations. Look for assets that haven’t depreciated beyond what you paid for them, especially if you still owe money on a loan.
Additionally, keep in mind the tax implications when you sell off assets. You’ll have to pay taxes on corporate gains, for instance, which could put you in more financial trouble during tax season. If possible, sell your assets for their fair market value so you don’t take a profit or a loss. That way, you can keep your finances even and avoid future financial trouble.
Run a Promotion
Sometimes, you can earn a quick buck by reducing prices on your products or services. While it’s not the best way to fund short-term business needs, it might put your balance sheet back in the black. This works particularly well if you have excess inventory that you haven’t been able to unload or if you need to downsize your business space.
Open a Line of Credit
Did you know that a revolving line of credit offers consistent access to cash when you need it? Lines of credit work similarly to credit cards; the lender sets a maximum loan limit, and you can use the cash whenever you need to fund short-term business expenses. Unlike a credit card, however, lines of credit typically come with more reasonable interest rates and more lenient terms.
Additionally, most credit cards come with limited cash advances. With a line of credit, you can withdraw money and use it however you wish.
Regardless of your business’s financial situation, the above four strategies can help you fund short-term business. Planning in advance can save you headaches down the road when a financial crisis strikes.