Maintaining Cash Flow: When Your Business Needs Financing

Maintaining cash flow in a business is crucial, but it is, of course, not a simple task. There may be a time when you need additional fund to keep the business in line. However, it does not mean that you can easily decide to apply for business financing loans. Applying for a loan is only suggested when you really need it. However, how do you know when your business needs financing?

Actually, business loan is important not only to maintain cash flow. Instead, business credit may serve as a strategic tool that helps a company grow. Of course, you need anticipate the need for business credit in the future. When the need for additional fund comes, you have immediate solution for it.

How to Know When Your Business Needs Financing

There are actually early signs that your business is going to need financing. Sometimes, you may not recognize them. The following are some ways to know when your business needs financing as suggested in Forbes:

when your business needs financing

Difficulty to Meet Demands

When you find that you and the staff are two busy to meet the customer demands, you may need to consider expanding your capacity. Of course, expansion needs more money. You may need extra source of funding to hire additional staff, buy inventory, upgrade the technology, buy equipment and vehicles, and many more.

By expanding your business, you may be able to serve all the clients. This is more likely to result in positive impacts. So, when you identify one or more of the following conditions, this may be the time when your business needs financing:

  • Difficulty to go after all sales opportunities because of limited time and staff
  • You must concentrate on the existing customers, but hardly have time to serve new ones
  • The existing technology is not enough to meet the customer demands
The Cash Reserve is Getting Thin

Cash flow is very important to make sure that you can address any expenditure, pay the bills, and pay the staffs. The cash reserve can easily get thinner, particularly in small business. Some financial advisors say that when your cash is only enough for the next 27 days, it is the time when your business needs financing. Furthermore, cash reserve is important for unexpected expenditures.

Your Credit Card Balance is High

Another sign that your business needs financing is related to credit card account. Pay a close look at the following signs:

  • Your credit card utilization rate is consistently high. This is the time when you owe most of the credit limit.
  • You have some credit cards with consistently high utilization

These two signs may show that your business is dependent upon credit to keep up with daily operation. This may be the time to find business financing.

The Need to Upgrade Business Tools

This may be related to the first point, namely, your business may need financing when the existing tools are not enough to keep up with the operations. You may need to buy additional tools and upgrade the existing ones. Tool upgrade may also be important to improve the product quality and to maintain relationship with customers.

When your business needs financing, the best thing to do is being proactive in finding the financing source. Fund is certainly very important to grow your business and to beat competitions.

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