Regardless of how well you have built your business financial infrastructure, almost every small business at one time or another will find themselves in need of a quick cash infusion or a cash flow loan. At any given moment, anything from unexpected growth to a fire can leave operations in a financial bind. Delayed payments, a lawsuit, even a lack of preparation can create a cash flow emergency.
Without needed fast cash, the business is forced to delay its contractual and financial obligations. Hopefully, the situation will work itself out. If it does not, the business is on the road to financial stress, damaging its operations, reputation and potential success. In many cases like this, small businesses have found themselves completely shuttered.
The small business has to be prepared. From loans to reserves, having access to emergency cash flow financing could be the difference between continuing operations, growth or failure.
Reasons to Have Emergency Cash Flow Financing
Small businesses cannot be ready for everything. Setbacks can be as diverse as slow paying customers to natural disasters and blackouts. Even if the business has built a respectable amount of working capital, it may not be enough. As many business owners who have had the experience will tell you, anything can happen.
Emergency cash flow financing is the option for any of the following.
- Natural disasters that cause structural damage
- Heavy machinery or other equipment breaking down
- Large legal fees, fines or tax obligations
- Employee expansion or turnover
- Loss of inventory or interruption in services
- Slow paying and delinquent customers
- Disruption in weather conditions that affect seasonal operations
- Renovation or construction expenditures
- Loss of revenue as a result of forces out of the business’s control
Emergencies will put an unnecessary burden on an already tight budget. Cash flow emergency financing is designed to help the small business. It provides owners with peace of mind, keeps employees at their stations, ensures clients, customers and vendors aren’t left to fend for themselves and potentially take their business elsewhere, and lets the business stay competition.
Have Proper Cash Reserves
Keeping sufficient cash reserves at the ready is the simplest – and hardest – way to prepare for a cash flow emergency. Experts advise small businesses keep enough reserves in the bank to cover expenses for no less than three months. It would actually be prudent if the business had essentially “frozen” funds that would cover the business an additional three months, a total of six months. This setup is, of course, near impossible for small companies operating on tight budgets. Putting aside three extra months worth of operating expenses for emergencies will be difficult. Not touching those funds will be near impossible.
Look at Financing Options
A certified business loan or line of credit are great ways to complement your reserves. The problem here is going to be convincing lenders to provide a loan or credit. They may want collateral or strong financial statements. This can put small businesses, especially new ones, under the knife. But it’s not impossible. There are companies whose specific purpose is to provide cash flow emergency financing to small businesses.
Invoice factoring accelerates funding via customer payments, giving the company liquidity needed to meet its obligations. This solution helps manage cash flow problems created by delayed payments, one of the major reasons for cash flow shortages. On average, a business can deliver goods or services and wait up to 60 days for payment. For small businesses working on short-term budgets, this can be a burden.
Invoice factoring is developed to sell invoices to financial intermediaries with an upfront payment coming from the factoring provider. While they hold the invoice until payment is received, the business has immediate funds.
Certified Business Loans
Certified Business Loans is a great way for the small business to get quick access to cash flow emergency financing. They utilize a recognized standard of competence, knowledge and experience for commercial lending, and will use those skills to help your small business stay on its feet. Certified Business Loans will make getting your hands on emergency cash flow financing a simplified and stress free process.