Liquidity is Essential for Businesses to Succeed in Any Economy
The success and viability of any business is proportional to the cash on hand to cover regular overhead expenses, as well as growth projects. Cash flow issues happen to even large companies, so ensuring liquidity is of the essence, regardless of the economic climate.
Debt is Bad, Credit is Better, but Cash is King
Businesses that use traditional debt-based loans to correct cash flow issues are setting themselves up for larger problems. Not only do loans create a liability with an extra monthly bill, but if the lack of liquidity becomes a recurring issue taking out more loans will make the problem insurmountable. Drawing on credit poses a similar conundrum, but unlike loans, lines of credit provide a source of working capital which can be replenished as the balance is repaid. Yet above all, having cash on hand is the simplest way to correct or prevent cash flow issues, and cash doesn’t impact business credit ratings or place debt on the books.
Liquidity is vital for all businesses, no matter the economic forecast. In a depressed economy, liquidity prevents the need for loans – which might be harder to obtain. In a strong economy, liquidity helps to build and sustain momentum and growth, while also building cash reserves if and when the economy starts to slow and revenue cycles are more uneven. To cover all bases, businesses use accounts receivable financing or factoring. Factoring converts unpaid receivables to cash, usually within a single business day. This eliminates the need for businesses to wait a month or more to see revenue, so they can correct cash flow issues, build up cash reserves, and achieve liquidity quickly. Accounts receivable financing helps to automate the accounting system, reduces the lag in revenue cycles, and is a versatile and powerful funding tool which can be beneficial in any economic climate.
Wise Commercial Capital specializes in factoring receivables. Our team helps businesses across all industries to improve cash flow without debt to maximize liquidity and nurture growth. To learn more about the benefits of accounts receivable financing contact Wise Commercial Capital today.