5 Ways To Improve Your Cash Flow

Written by: Steve Dusek

Everyone wants to save money but figuring out how to do it can be an overwhelming task. Couple that with a COVID-19 pandemic or an economic downturn, and you may find yourself feeling paralyzed. 

“Where do I begin?”

“What resources are out there to help me save money?”

“Should I focus on operating costs? Payroll? _____? ______?”

The list of dreaded questions goes on and on. 

The good news is that there are a variety of options to help small business owners improve their cash flow and keep their business afloat during unprecedented times. We’ve worked with hundreds of small business throughout the state that have taken a few different routes to preserve their cash flow and have seen them come out the other side – not only surviving but thriving. Here are a few ways your business can do the same:   

1. Business Expense:

Of course, you should take some time to examine your operating expenses and carefully consider what is and is not necessary at the time. Categorize your expenses into (1) absolutely necessary and (2) nice, but can get along without, and see if you can identify some small opportunities to save money. It may not seem like much at the time, but it can add up fast!

2. Incentives for Early Payments:

Depending on the type of business, incentives for early payment might be an option for your small business. by offering some type of discount to customers for paying up-front, business cash flow will increase. This gives your business cash instantaneously and helps the customer by saving them money. It also saves the business time and effort when trying to “chase down” payment sometime in the future.

3. Review your Business Model:

Sometimes the best way to navigate downturns or financial difficulties is with creativity. Take some time to review your business model and see if there are any new and innovative ways that you can generate more revenues that you have not done before. Are there any additional products or services you may be able to offer? Can you sell your products online? Are there any training courses you can offer for your customers? If you are out of ideas, try asking your customers what they would like. Not only will you expand your business model, but you may be able to provide yourself with some extra revenue to help you through this period of decline.

4. Refinance Options:

With interest rates as low as they are, your business might benefit from a debt refinance option (especially if your current debt has steep payments). For refinancing, you will have one of two options: 

  • Straight Refinance – this is where the lender may be able to provide a lower interest rate and re-amortize the debt over a longer period, resulting in lower monthly payments
  • Refinance with Cash-Out – this option is for those businesses that need additional working capital or may be looking to fund some type of expansion. In this case, if there is equity in your building, you could borrow against it at a lower rate and use the cash for business operations.

5. Loan Deferments:

If, after exploring all other options, you are still having trouble, you may have the option to defer your loan payments. This option, however, is granted only for extraordinary circumstances and you must be able to show your plan for how your business will improve financially after the deferment period. Most deferment options range from anywhere between three to six months, which will help free up cash for your business to cover expenses during a time of revenue decline. If you decide to go the deferment route, be sure to ask about the following details:

  • Is this a principal-only (where you continue to make interest payments) or principal-plus-interest (where interest keeps accruing during the deferment) deferment?
  • How does the catch-up plan work? Does the bank put these payments at the end of the loan and extend the maturity, or will they require the catch-up to be paid as soon as the deferment period is over? Be sure you understand how this will work for you and your business.

Contact your local lender to discuss your options and what would work best for you and your business. 

These are some of the best ways for small business owners to improve their cash flow today. You can also reach out to other organizations like CTB, Small Business Development Centers, and SCORE for mentoring, assistance in reviewing your financials, and asking questions from a different perspective. If your business is looking to do something similar, ask your lender today about these options so you can help your business not only survive, but thrive.

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Steve Dusek is the president and CEO of Dakota Business Lending. He has over twenty-eight years of experience in managing and delivering non-traditional lending solutions for small business in rural America and in maintaining successful business cultures.