How small business owners can solve cash crunches

Author: CBS News
Small business coffee shop. (Credit: Unsplash)
Small business coffee shop. (Credit: Unsplash)

When you own a small business, cash is king. Preserving your capital helps you pay suppliers, cover weekly payrolls and still keep the lights on when the business inevitably runs into problems.

“Cash–it’s like ammunition,” Tom Maoli, a small-business expert, told CBSN. “If you’re at war, you want as much ammunition as you can possibly have.”

Cash flow problems can be common with small businesses. Maoli suggested owners try to keep as much of their working capital as possible and instead seek alternative funding to finance more of their operations. Owners can get loans from banks or even the U.S. Small Business Administration (most funding applications can be done online) and they can expand their lines of credit, including seeking raises in their credit card limits, or secure funding from outside investors.

Going into debt may be intimidating for some small business owners, but it’s critical to seeing a businesses grow. That means small business owners need to build good credit scores, so that they can borrow different types of funding, Maoli said.

While it’s possible for small business owners to apply with bad credit, especially if their businesses demonstrate they have good cash flow, it’s best to establish good credit scores first. Maoli even suggested building good credit by taking out loans, even if they’re not truly needed, just to pay them back in a timely manner.

“That shows the bank that you can do it — you’ve gained credibility, and then they’ll give you more,” Maoli said.

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