Friday, September 25, 2009

When Business Needs Cash

Strangely enough, the best and easiest time to raise cash for your business is when you don't need it. Cash and credit are the lifeblood of any business. However, when your business is in serious need of a cash injection, that is the hardest time to secure a loan. Raise cash for a rainy day when you're flush.

Lending institutions are in the business of making a profit on money that they lend. Therefore, a strong business is a far better prospect than a troubled one. The stronger a business' position, the better the terms it can secure on financing. Thus, when your business least needs a cash influx, go shopping for money. Proudly walking in the door of a financial institution with one's head held puts you in the driver's seat. Even in today's markets when banks are being far more selective, they prefer lending money and providing credit to strong, secure businesses. A smart bank seeks to limit its risks.

Experts suggest taking several advance steps while you're on strong financial footing. For example, draw down your credit line if you fear that rocky times are ahead. You may pay interest on unused funds but that's preferable to having the bank cancel an unused credit line.

While your company is still in its infancy, raise as much capital as you can from a variety of sources. It may be easier to sell your idea on paper rather than after reality sets in. Your initial excitement may be contagious to potential investors so use that to its maximum. New businesses often take time to show positive results. That early cash may help you get over the humps.

Be sure that you have a strong grip on your business. Learn to read the signs of impending problems and secure your financial grip before the situation becomes precarious.

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