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When Credit, Not Cash, is King
It might seem strange, in a downturn pinched by a credit crunch, to suggest thinking about credit. But the lag between delivery and payment – that time when you’re waiting on customers and your suppliers are waiting on you — is nothing new. But in tough times, it can get worse, as the domino effect of cash flow hits your supplier – and then you. No doubt you have some reserves on hand (right?) for rainy days like this. But don’t forget about credit – not just a business credit line, but an ongoing business credit card that you can use in a pinch.
There are advantages to both cash and credit, but don’t forget, use of credit can help keep your credit history in good standing, even if you’d rather keep the debt to a minimum in these times. Here are four tips for using credit to help you manage your cash flow and get back to the work of delivering great products and services.
1. Buy everything on credit. Sound radical in a “credit crunch”? Most small businesses should be able to get credit—Obama’s relief and recovery plan is favorable to small businesses, and the regional Fed boards report there’s been a steady issuance of commercial loans by banks. So use it.
2. New lines of business. Considering a new product line or expansion? That’s great news in this downturn. But it’s recommended that you finance it with credit in the beginning since you will generally not be bringing in cash on your new line immediately after rollout.
3. New partnerships. Don’t wait for the cash to come around when a hot business opportunity comes up. Just because you can’t offer an upfront cash offer for products or services — or a stake in a company that could be a strategic ally — doesn’t mean you should lose out. That’s what your credit line is there for. Seize the day.
4. All business-personal expenses. Credit cards often come with perks – miles, points, cash back, etc. Therefore, use of these cards can help you put cash back in the company, whether it’s to use miles for business travel, points toward gifts for employees and customers or cash to drop into your business’s bank account.
Ultimately, strategic use of credit will not just keep your business humming in the short term. It could help you save money later by putting you in good standing with your suppliers. In the recession, despite what you’ve heard, credit, not cash, can be king.
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4 comments for “When Credit, Not Cash, is King”
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Actually, Laura, you listed four tips
During recession a lot of mess happens, food shortage, lack of work, big companies shut down and a lot more. Like ABC fall lineup 2009 has been announced. The lineup has breadth and depth, with some shows having dramatic subjects. At least one show will be about the recession, as the namesakes of the show, the Heck family from Indiana, weathers economic turmoil and installment loans. Also will be Cougar Town, about a south Florida town that revolves around the high school football team and a preponderance of aesthetically pleasant divorced 30 and 40 something women. (You know what we mean.) Since its all regular network, you won’t need debt relief to catch the ABC fall lineup 2009.
Good catch Melanie! Fixed – changed “three tips” to “four.” Thanks!
The lineup has breadth and depth, with some shows having dramatic subjects. At least one show will be about the recession, as the namesakes of the show, the Heck family from Indiana, weathers economic turmoil and installment loans.