Where to Find Money When You Need It Now

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Dollar-1362244_1280When you are out of cash and need to pay bills and cover payroll, you need to find the cash now.  Yes, you need to discover the root cause of the cash problem by reviewing your sales cycle, but that takes time you don’t have right now.

So just where do you find the cash?  Knowing where to look is vital.  The best thing to do is to start inside your business and work out from there.  Every option has its risks and you normally wouldn’t want to do them if you didn’t desperately need the cash.

Lower your compensation.  The first place to find money is to temporarily lower or even eliminate your salary or draws until the cash situation improves.

Collect your receivables.  Review your aging report and call all of your overdue invoices.  Offer a credit card payment option or to go by and pick up a check.  Offer a discount if they pay now.

Next, take a look at those invoices that are not overdue and give them a call.  Level with them about your cash temporary cash problems.  Ask them for a favor to help you out of your problem.  Again, you may have to offer them a discount in order to get them to pay early.

Collect prepayments on work in progress or work soon to be done.  This works best with your most loyal long-time customers.  Call them and explain that you have a temporary cash flow problem that you need their help with.  In exchange, give them a discount or add some free services for providing you with the much-needed cash.

Sell your invoices.  This is called factoring, and usually costs you about 4 percent of the invoice balance.  Make sure you do your due diligence before you sign on with a factoring company.  It is easy to start factoring, but it can be very hard to get out of it.

Hire a collection agency to go after those invoices you have given up on.  They will normally charge you between 20 and 50 percent of the invoice, but getting half of the invoice is better than getting nothing.

Lend your business money.  If you have personal assets or credit, lend it to the business.  I have worked with many profitable businesses that only survived an earlier cash problem by remortgaging their home.  Be sure your spouse is in agreement with this.  You don’t need marital problems to go with cash problems.

Ask your parents or a rich uncle for a loan.  Family members want you to succeed and normally will trust you.  Sharing your situation with family and asking for a short-term loan while you work out the problem is often a quick solution.  Make sure to handle the loan like a business loan with all the proper documentation.  You should make it a priority to pay this back as soon as possible in order to avoid hard feelings.

Get extended terms from your vendors.  Work with your vendors to extend the time before your invoices are due.  Being able to pay your vendors in 60 days rather than 30 can often be all you need in order to survive a temporary cash crunch.

Borrow from credit cards.  About 85 percent of small business owners have had to use credit cards to grow their business.  Don’t be afraid to use your credit cards in a pinch.  But always keep in mind that this can be a very expensive solution, so work hard to pay these off as soon as your situation improves.

Get a bank line of credit.  This should really be set up long before you need it.  Banks don’t like to lend to a company when they need it.  The time to set this up is when you don’t need it and when the financials look great.  In today’s economic climate, it is almost impossible to get a line of credit if you are having cash flow problems.

Bring in equity partners.  If your cash flow problems are more long-term, getting an equity partner may be a good solution.  This requires you to share part of your business in order to get the funding you need.  Think long and hard on this, and be sure to get legal and accounting help to set this up correctly.