We’ve often spoken about the factors that can help you and your business look more attractive to lenders – like having a strong business credit profile. While important, there’s one major factor lenders look at that requires greater attention: cash flow.
James Good, of the Small Business Payments Company, explained to Forbes recently that small businesses need to be able to not just manage their cash flow – but they need to be projecting what it will look like weeks and months in the future. A lender wants to know that you have cash now, but they also want to be assured you have the funds needed to handle a hiccup in payroll or another area of the business.
However, there are more reasons to project your cash flow months in advance than for the sake of small business loans. Unfortunately, managing cash flow – as Good explained – isn’t something most business owners are experts in.
“A big thorn in the side of almost every small business owner is the challenge of good cash management,” Good said to Forbes. “Most small business owners didn’t start their businesses to become accountants and most of the tools previously available are very complicated and difficult to use for the uninitiated, or too basic to be of much value.”
When you don’t have a good handle on your cash flow, there’s an increased chance that you’ll run into cash problems. Businesses that have a strong handle on their day-to-day finances are less likely to run into trouble because they know the costs they can and can’t manage.
So, in order to become the most attractive borrower you can be, learn the importance of cash flow projection and management. Your business – and your lenders and investors – will thank you for it!
Do you have any tips for managing your cash flow?
Tell us in the comments below.