Liquidity is the key to business growth. It’s what gives you the flexibility to grab golden opportunities with both hands that will enable you to ensure the success and growth of your business. Businesses of all sizes and functions need a healthy liquidity to thrive. While even the huge multinational giants can be brought to their knees by poor liquidity, it can be all the more crippling to a fledgling SME.
What is liquidity?
Liquidity is essentially your cash flow and the amount of ready cash your business has to make the moves and purchases that will ensure your growth. This could be buying a new piece of equipment that will increase your overall output and productivity, it can be moving to a larger premises to accommodate more stock or moving to a location with better foot traffic. It could even mean hiring more staff or purchasing a bulk order of stock that will steadily increase your profits over the coming months. Failing to move on any one of these areas of investment could hobble the growth of your business, and the last thing you need in a challenging economic climate is to take a step backwards.
But if cash is king, how can the cash strapped entrepreneur hope to invest in its own future when cash flow is impeded by overinvestment in stock or uncooperative debtors? Fortunately, there are options available to help you to make those prudent investments even in times of poor liquidity.
Bridging finance is a flexible and increasingly popular option for businesses that need an interim loan to facilitate an impending purchase. A finance broker can usually arrange bridging loans at short notice, making them useful when you need to move on a purchase quickly to avoid losing out to a competitor. Bridging loans are secured, short term solutions intended for those that need cash quickly for purchases that can’t be missed. They can be made to you as an individual or to your business for just about anything, and if a bridging loan is made on a property, it can usually be converted into a commercial mortgage.
While “betting the farm” may be considered extreme, a home equity loan can be a justifiable risk if you’re confident in your business and have evidence to demonstrate that your new purchase could support projected growth. If you need to move quickly, then home equity is a quick and relatively low interest solution to getting quick cash to invest in your business’ growth. Just be wary of variable interest rates which may make repayments harder to budget for.
Business credit cards
Depending on your credit score and your existing credit commitments, opening a new credit card for your business may be the way to go. Again, the trick is to box clever with interest rates as the terms of interest rates tend to change over a period of months or years. Switching the debt from one card to another, just like with a household credit card, can be an effective way of avoiding overpayments on interest.
Whatever option you choose, there’s no need for a lack of liquidity to prevent your business from striking gold.