Worse case scenario has happened and your small business can’t make payroll. When you can’t pay employees who rely on you for their own financial stability, it can be a sign that the business is in trouble, but often it is just that the cash flow cycle is out of balance. That can happen if there are a lot of overdue accounts receivables, a large inventory purchase, or a seasonal decline in business. No matter the reason for the cash shortage, take immediate action to keep employees happy and your business flowing smoothly.
9 Ways to Raise Cash Quickly
Not paying employees can quickly lead to other problems, good employees may leave the company, become unhappy, provide poor customer service or not complete their work. To keep your business thriving, you should do all you can to pay your employees consistently. The following ideas can help you create cash flow quickly in a payroll crisis.
1. Collect money you’re owed. Work quickly to collect all invoices that are past due or due now. Email and call clients to create a sense of urgency and offer wire transfer as an option to expedite payment.
2. Collect money you will be owed. Contact clients whose invoice dates haven’t arrived yet and ask for payment early. A discount or a promise of a future discount would be a good incentive. Loyal clients who always pay their invoices on time, might be willing to pre-pay for their next service or shipment if a tempting discount is offered.
3. Sell your invoices or accounts receivable. Factoring, sometimes called accounts receivable financing, is an excellent way to get money quickly and it doesn’t incur any debt. Basically, your company receives money now for invoices that will be due in the next 60 to 90 days. This type of financing can put immediate cash in your hands from $5,000 to $10,000,000 and can be applied for online. Request a quote from Flex Business Capital, a reputable factoring company serving small businesses in the U.S. and Canada.
4. Use your credit lines. Now is the time to use your business credit card or line of credit with your bank, if you have it.
5. Borrow from friends and family. There probably isn’t time to apply for a new line of credit or a traditional bank loan, so asking for a loan from friends and family is a quick way to get a cash infusion. To prevent future contention, create a contract and carefully outline the loan agreement terms.
6. Try alternative funding options. Many new types of loans are flexible, faster and easier to obtain than traditional bank loans. For instance, a merchant cash advance is given against your future credit card sales, asset based lending is when inventory is used as collateral, hard money loans use real estate as the asset, and a micro lender makes loans for smaller amounts than a traditional business loan, starting at just $1,000. Apply here to see what is available for your small business today.
7. Sell or rent an asset. Depending on your industry, you might be able to sell a piece of equipment or vehicle or rent part of your office space to quickly infuse your business with cash.
8. Liquidate your inventory. You might try liquidating surplus inventory for a quick cash infusion. Selling on eBay, Amazon, Craigslist, or contacting a liquidation company won’t earn you the same profit as selling at retail, but it can earn cash quickly.
9. Talk to your suppliers. Connect with your regular suppliers that you have a solid working relationship with and ask about a short term extension on your payments due. Use the money you would have paid these invoices with to pay your employees.
Learn more about What to Do If Your Small Business Can’t Make Payroll? in Part 2 here.
Bjorn Peterson is the Owner of Flex Business Capital. Flex Business Capital offers small businesses factoring financing to solve cash flow problems without debt, so they can focus on growth and success. Apply for funding for your company here.