Cash Flow for Small Businesses

Running a new business may be a daunting and challenging task. From management to cash flows, everything is in the hands of the owner. Many at times, these owners can question the importance of their cash flow and whether they really need a positive cash flow or not. Simply put, cash flow is the amount of money coming into a business (cash inflow) compared with the amount of money leaving the business (cash outflow).

The cash inflow can come from multiple sources such as customer payments, loan receipts, investors or interest received on savings. This cash is immensely important to the success of the business as it becomes the sole method of payment for business operations. It is used to pay rent, wages, cost of raw materials and other day-to-day expenditure. Having a positive cash flow represents that the cash inflow is greater than the cash outflow and ensures smooth running of the business. A high positive cash flow will further allow small businesses to reinvest into their business and make new investments to further improve growth.

While this may sound tricky to achieve, a positive cash flow can be easily achieved through proper organization of assets and long-term planning. By making the best use of the cash in hand that you may have invested into the business yourself or received from elsewhere, small business owners can achieve long-term growth.

As an owner of a small business, you should always be aware of every expense that has incurred or may arise in the near future. This could include incorporation fee, accounting expenditure, licenses, construction, rental agreement, marketing and initial supply of raw materials. Once these are accounted for, monthly cash inflows and outflows must be determined. Factors such as projected sales, possible loans and investments must be considered. A rule of thumb for small businesses is to project sales conservatively, so you could outperform your initial expectations and have a better turnout than projected.

Conclusively, a small business owner must assess his monthly or operational expenses. These can include rent costs, insurance, marketing, advertisements, utilities, working capital, taxes and cost of supplies.

Financing your Small Business

While determining all the expenses you may face as an owner of a small business, it is also important to assess how you are going to finance it. Since initial costs are always high, it is risky to rely only on the capital invested. At this point, business owners should consider different sources of finance.

Typically, most financing options for your business can be categorized into two main options:

  1. Debt financing(borrowing money): This type of finance consists of loans that do not require owners to surrender part ownership of the company. However, obtaining these loans can be difficult as they usually require collateral, charge high interest and set a time limit for payback
  2. Equity financing(selling part ownership to investors): This kind of financing is simpler for owners as they do not have to repay the loan. However, the owner will have to compromise on profits, income and ownership of the business.

While each type of financing has its pros and cons, every business owner will have to choose for himself considering which option suits him better.

Loans or business funding can also be categorized according to how it will be used. A small business looking for funding for operational expenses can opt for a working capital loan that can allow for the regulation of day-to-day expenses and small purchases whereas a large business looking for expansion can opt for long-term loans that allow for a large sum suitable for large purchases.

For most small business owners, banks or other lending institutions can offer both short-term and long-term loans. The main difference between the two is that short-term loans allow for the business to obtain funds faster, whereas long-term loans are usually in greater amounts and repayments are scheduled for over one year. Short-term loans are generally easier to obtain for small businesses as they require less security and do not impose restrictions. However, interest rates paid on short-term loans are much higher which may cause further hardship for small businesses.

Many small businesses nowadays opt for short-term loans. Since cash-flow shortage or negative cash flows are common with these businesses, the need for funding is significant. However, the biggest problem for small businesses is that securing a bank loan has become increasingly difficult. According to many statistics, banks are now lending 20% less than in the past, making their funds highly competitive and selective.

About ABR Finance

ABR Finance is a private limited finance company based in Australia. We specialize in cash-flow funding for small businesses that operate in niche markets and help them achieve a high positive cash flow. Since we understand the struggles of a small business, all our loan packages are extremely flexible and especially designed to assist businesses in their initial phase to overcome all teething problems.

ABR Finance provides a remarkable cash-flow finance facility to help your small business with the extra cash it needs to smooth any bumps you may face during start-up. From payments to suppliers and rent costs to wages and operational expenses, ABR Finance can help you move through it all.

Since we are designed for small businesses, we do not require any hassle or time-consuming regulations such as real estate security. Instead, our application and approval process is simple, easy and quick. For most business finance applications, we send our replies within 24 to 48 hours in order to ensure peace for the company dealing with us. Even if you have a rough credit card history or fall behind ATO obligations, you need not worry because our motive is to try and assist every company that comes to us with cash flow problems.

Why ABR Finance?

If you still aren’t convinced on choosing us as your lender for business finance, here are 5 simple reasons to choose ABR Finance:

  • Hassle-free and Quick Loan Approval
  • The borrow limit ranges from a mere $15,000 to $300,000+
  • Credit Card records are not considered during your application process
  • We do not require strong collateral or security such as real estate
  • Unlike most banks, we promise to provide loans in most situations!