How Small And Medium-Sized Businesses Can Avoid Common Cash Flow Challenges

Author: Canadian Easy Loans | | Categories: Commercial Mortgage Rates , Mortgage Agent , Mortgage Brokers


Cash flow is the key indicator of how a business is performing. When a company maintains a good level of working capital, it can meet obligations promptly without needing to borrow money. 

However, at Canadian Easy Loans, we have come across a lot of businesses that often do not keep their financial statements up-to-date, which makes it very difficult to determine whether their business is healthy or unhealthy.

While we know managing cash flow is difficult, especially for small and medium-sized businesses but it’s necessary to make sure financial difficulties won’t disrupt the operation of your business.

To help businesses improve and manage cash flow situations, we have put together a list of how small and medium-sized businesses can avoid common cash flow challenges.

1. Hire a competent bookkeeper or accountant

Having a competent bookkeeper or accountant is the necessary first step. Keeping track of your withdrawals and deposits, aged receivables, paid overhead expenses, balances, and important financial information crucial to running a healthy cash flow business is a must. If you do not understand financial statements, a good bookkeeper or accountant can explain the statements and what they mean for your business.

Up-to-date financials are a must and readily available to provide for lenders who may be funding your business.

2. Have a consistent cash flow

Another problem faced by small and medium-size businesses is having the inadequate cash flow to maintain day-to-day operations or to take on new projects. It is crucial for small and medium-sized business owners to implement solid cash management strategies to maximize cash flow.

3. Utilize the cash flow statement

A business’s financial statements identify most of the problems and, once identified, can help a business find solutions. Below are listed a few examples:

a. Aged receivables: If a business is forced to wait for sixty to ninety days or longer to get paid on completed work, this can result in a huge drain on cash reserves. A business may be finding it difficult to balance payroll and day-to-day operational expenses.

One solution is to offer a discount that is 2% to companies to pay you sooner. To receive monies faster, a business may also want to consider a short-term loan, PO financing, or factoring. Though an alternative short-term business loan is recommended, PO financing and factoring are feasible.

If profit margins are set that allows a healthy return on projects, these types of funding will offset the cost of borrowing and still allow good returns.

b. Taking on new projects: A problem with especially new businesses and small and medium-sized businesses is not being able to finance new projects as often more manpower, inventory, equipment, and wages need to be paid for upfront.

Financing is a solution that allows a business to relieve not only stress but promotes the growth of a business. Short-term funding with an unsecured loan through alternative lenders or a secured loan through traditional lenders such as banks is the answer.

Using an alternative lender is often the best solution, even though the interest rate is a bit higher as funds are available within a few days. A business gets to avoid the red tape and time required, which is typical when dealing with a bank.

Equipment lease financing is a viable option for equipment where the asset is considered an expense and monthly payments are a 100% tax write-off.

4. Avoid high payments on high-interest loans

Having a high debt load with high-interest loans is a real detriment to having a healthy cash flow. Merchant Cash Advances are quite often used by businesses seeking immediate cash.

It is highly recommended that a business establish a relationship with a traditional lender to consolidate the debt. Lower interest rates and a more reasonable monthly payment will allow a business to grow its cash reserves and relieve the stress of trying to meet its day-to-day operational expenses. Though the initial line of credit may not be the best terms and conditions a business is seeking, once the trust is built with that lender over time, they will more readily provide the financial backing a business needs. An unsecured business loan is a solution where a business can borrow up to 100% of its monthly cash flow without any collateral required.

For more tips on overcoming cash flow challenges, reach out to Canadian Easy Loans today! We are a Fintech financing platform Canada-wide with twenty-three programs supported by a vast network of over two hundred and thirty lenders. Our goal is to provide businesses and consumers with the lowest cost of borrowing in Canada. We offer bridge loans, mortgages, business loans, and land acquisition services.

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