Many companies run into problems with their cash flow from time to time, especially small businesses. In case you need a refresher, cash flow refers to the inflow and outflow of working capital for your business. A healthy cash flow should see sufficient money coming in and plenty of working capital being reinvested in business growth.

What Are Cash Flow Problems?

What happens frequently is that businesses have more debts or obligations than they do working capital to deal with them. This doesn’t mean you’re not making money — it means the timing is off for when you’re making money. Ideally, you would always have sufficient money on hand to pay off your suppliers, and some leftover for business opportunities.

What often occurs, in reality, is that businesses come up against a wall of bills at the beginning of the month, and they run out of capital. This forces them to push back payments to suppliers, sometimes incurring late fees and other problems.

What Causes Cash Flow Issues?

A big reason healthy cash flow gets interrupted has to do with the difference between your credit terms and the ones you give your customers. Many small business owners are happy to provide terms of 30 days or even 60 days for customers to pay.

Your suppliers may not be as lenient. As a small business owner, you don’t have a lot of leverage with suppliers, so you may not have much of a choice if they require payment in 15 days or even payment on receipt. You need inventory, so you have to fork over whatever working capital you have sooner rather than later.

As you can see, the main problem often lies with financial flexibility, not with sales volume. Of course, there are times when the market slows down, which can also cause problems with available capital, at least until you sell off more inventory.

What Financing Options Can Help?

One of the best ways to smooth out your cash flow is to have a source of working capital financing available, such as a business line of credit. That way, you can get an extra infusion of working capital as needed and pay it off later in the month when you get paid.

Equipment financing helps differently: helping you generate profits without investing much money each month. You can get equipment financing with low monthly payments that increase your business’s capabilities significantly.

The best part? Once you finish paying off the equipment, you’re getting pure profits.