Any business can run into cash flow gaps from time to time. A cash flow gap could occur if you owe money to a supplier but havenât received payment from your customers. Or perhaps your business is seasonal, and itâs a slower period, or youâve had to hire seasonal staff before your revenue has started to pick up again.
If youâre a small business, you may feel the gap in money going out and coming in more acutely than a larger company. But donât panicâthere are ways to manage your cash flow with smart credit solutions.
Sign up for a business credit card
A low-interest business credit card could help you preserve your spending power when cash flow is tight. If youâre waiting on customers to pay their bills and you owe money to a vendor, a credit card with low interest rates, a flexible credit limit and no annual fee could help cover the difference. If you have enough cash on hand to pay off your credit card bill in full by the due date, you could even avoid paying interest. Depending on the type of card you get, you may also earn points, cash back or statement credits that could reduce your overall expenses.
Some credit card providers also offer helpful financial management tools to support small businesses further. For example, CIBCâs CreditSmart® tool is a helpful way to budget, track and manage your business expenses.
Apply for a line of credit
Similar to a business credit card, a line of credit could help you access funds quickly. Like a credit card, a line of credit is a form of revolving creditâmeaning you can borrow money up to your approved limit, repay it and borrow more funds. The main difference with a line of credit is that thereâs a limited period during which you can borrow, called the draw period. Once the draw period ends, youâll need to start repaying your balance with interest each month. A line of credit is also different in that you wonât have a card to swipe or tap. Instead, youâll need to use a check or transfer the funds to your bank account online and use your debit card.
With a line of credit, you may be eligible for a lower interest rate and a higher credit limit than with a credit card, although it depends on your credit profile and business needs.
Consider a loan
If your cash flow issues are more long-term, or if the amount of money you need would max out your credit card or line of credit and cost you a lot in interest over time, a loan with a fixed repayment schedule could be a better way to pay what you owe. Loans often have lower interest rates than credit cards and lines of credit. However, you typically have to repay your loan in equal monthly installmentsâyou canât just pay the monthly minimum like you can with a credit card. Itâs important to make sure the payments work for your budget before you sign.
Before you apply for a loan, make a plan for exactly how you want to use the money to cover your cash flow gap so you donât borrow more than you need. That way, you can keep your payments and interest costs as low as possible.
Keep an eye on your cash flow
Itâs a good idea to monitor your companyâs performance and perform financial forecasts on a regular basis. If you anticipate a gap in your cash flow, find a smart credit solution sooner rather than later so you wonât have to borrow money at the last minute, potentially at a higher interest rate. Understanding your full financial picture could also help you decide which credit solution is best.
Estimating how your cash flow will look in the longer term could also help you build a rainy day fund so that you have cash to tap into if you run into a surprise gap in the future.
Take advantage of smart credit solutions
When you run a small business with razor-thin margins, even small cash flow hiccups can cause big problems. Understanding the types of credit available to you can help you make the smartest borrowing decision for your company.
Media Contact Information
Name: Sonakshi Murze
Job Title: Manager
Email: sonakshi.murze@iquanti.com   Â
