Cash flow is critical to a growing business. Some ways to maximize your business’ credit are outlined below.
Business Cash Flow
Track and monitor your cash flow on a regular basis. Cash flow information should be easily accessible from your accounting system (and we can help you with that!). If you need help interpreting your cash flow on your own, an accounting professional can help you.
To successfully manage your cash flow, the following elements of the business can maximize the accumulation of cash.
Use Business or Personal Assets as Collateral
Some lenders may lend higher amounts at lower rates if the loan is secured by assets. Putting up assets as collateral can reflect the owner’s level of confidence to repay the loan. Assets can include real estate, inventory, equipment, or accounts receivables. A common rule of thumb: lenders will typically assess a loan amount at 50-80% of an asset’s value.
Earn Longer Terms on Payables
It can be extremely helpful to build trust with vendors by paying before the promised payment date. After establishing a solid track record of repayment, you may be able to negotiate for longer payment terms. In many cases, 45-day repayment terms have become standard. In some industries, it’s acceptable to pay in 60 to 75 days if those terms are negotiated up front.
Find Peer-To-Peer Loans
Compared to traditional loans, peer-to-peer loans can have higher interest rates and amounts can be lower, but it can be a source of credit.
Ask Friends and Family
Asking friends and family for a loan can be sources of credit. If you take a loan from a person close to you, sign a structured loan agreement so expectations on repayment and interest rates are clearly known upfront.
For more information on business credit, find out the ins and outs of how a business credit score works.