There are about 28 million small businesses in the U.S., and even when things are going well, they can struggle to have enough cash on hand to pay bills. There are a number of factors for this. Consumers often pay with a credit card, which can delay getting cash in hand. Businesses also may have the issue with suppliers expecting payment for goods on a schedule that does not match up to their own schedule of receiving payment. Because of this, it’s not uncommon for profitable businesses to struggle on a day-to-day basis. The good news is that there are some fairly convenient options to help small businesses pay their bills.
If your business is established and you have a good credit history, you may be able to take out a line of credit from a bank or other financial institution. A line of credit allows you to borrow money easily when you need to and then pay it back on a flexible schedule. Drawing from a line of credit is easier and usually cheaper than taking out a separate loan each time you get in trouble. As long as you are current on payments and have not hit your credit limit, you can continue to borrow from the line as needed.
Another may to pay your daily costs while you are waiting on payments is to use invoice factoring financing. Invoice factoring financing, also called business invoice factoring and invoice funding, is a method of financing in which you borrow against your unpaid invoices. For example, say you are waiting on a payment of a $10,000 invoice that will take 30 days. You could work with an invoice factoring company to borrow anywhere from 70% to 90% of that amount now to meet current obligations and then pay it back when you receive payment. Working with commercial factoring companies is a good option for businesses that can’t get a line of credit or that just want a convenient way to get funds in advance. Keep in mind, though, that small business factoring is typically more expensive than getting a loan or line of credit.
There are a number of reasons why small businesses fail, but failing to meet daily cash flow needs shouldn’t be one of them. As a business owner, you need to look at all options available for paying the bills.