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Five Sources of Quick Cash

February 9, 2009
During the current recession, many businesses could use a little more cash…and fast. Here are five quick & practical ways to get the cash you need in a tight credit market.

to evaluate your business cashflow and to look for the safest and smartest ways to manage your debt obligations.

  • 1 – Get Paid Up Front – Try to obtain payment up front. Require customers to make deposits. Consider offering an incentive for payment upon signing. Secure cash to help your business flow through the project. Secure the cash you need in advance of the work. Up front payments not only work in the professional service industry, but are also applicable to retailers through the purchase of gift cards.
  • Did you know that almost 50 million adults purchased gift cards in the last year.
    – nearly two thirds of these spent more than the card value!
    – over half of gift card holders make more than one trip to deplete
    the value of the card.
    a third of total the value is never used or redeemed by the user. nearly a fifth of gift cards are never redeemed.
  • Whether it’s through gift cards or down payments, get your cash upfront.
    2. Collect Payment – Now that you’re obtaining pre-payments from current customers, make sure to collect from past customers. Be polite, but be persistent with. If you extend credit, shorten your credit terms terms from 30 and 60 day to 15, 30 or 45 day collections. Encourage customers to make progress payments as soon as possible. It’s better to get 5 percent of what is owed on a weekly basis rather than nothing at all. Above all, try to maintain a good relationship with your customers. These are difficult times for everyone.
    3. Try Factoring – Factoring is a long accepted financing model that allows your business to get paid immediately on outstanding invoices. A factor will pay you the balance of an invoice in advance, minus his fees, and wait to receive payment from the customer. First, however, a factor must verify that your customer is willing and able to pay. Accordingly, this method works best for well established customers with good payment histories. This is a quick and relatively risk-free way of getting the cash you need without having to wait 30, 60 or 90 days for payment.
    4. Slow Your Payments – Another way to free up extra cash is to slow or reduce your payments to suppliers. Contact your vendors, lenders and credit card companies to renegotiate your rates, fees and repayment schedule. The key is to do so before you begin to have payment issues. You should be able to leverage your good repayment history to obtain more advantageous terms.
    5. Borrow from Alternate Sources – When all else fails, borrow cautiously. Many experts agree that borrowing from yourself to aid cashflow is preferable to losing your business. Start by liquidating inventory, equipment and depositing cash owner equity. However, as you would with a bank, you should always have a plan to pay yourself back. If you have a line of credit, meet with your bank about keeping your line open and explore the potential of increasing the line or removing the condition that requires you to rest the line periodically.

Meet with a SCORE Lancaster counselor

For more information, call 717-392-3097. Visit SCORE Lancaster online at http://www.scorelancaster.org

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