Jump to Main Content

How to increase cash flow with financing

business woman writing address label on a package

These days, it’s not uncommon for business owners to worry about cash flow. Your business may be experiencing a cash flow problem due to slow sales, temporary business closure, a late-paying customer, unexpected expenses, or seasonal revenue fluctuations. Or maybe your business growing, and you need extra cash to fund expansion into new premises, hire additional employees, invest in marketing or buy more inventory.

Whatever the cause, you can stress less by learning about the different financing options available to help you improve your cash flow. Before you start researching the right option for your business, take these steps:

  1. Diagnose the source of your cash flow problem. Is this a temporary, one-off issue (such as a late-paying customer) or an ongoing problem? Note: If you discover that low cash flow is an ongoing problem you may need to reduce business expenses, raise customer prices, improve profitability and review your overall business model to keep it viable.

  2. Determine exactly how much money you need by completing or updating your cash flow forecast.

All set? Great, let’s take a look at three common financing options to increase cash flow.

1. Trade business equity for cash

Giving up some of your equity in exchange for cash is a good strategy for a business that needs to get out of some financial trouble or wants to pursue growth opportunities. Options include:

Your personal savings: If you used your own cash now to grow your business rather than borrowing, you might be better off over the long-term.

Family and friends: Family and friends are likely to be more forgiving than outside investors should your business experience some difficult times.

Angel investors: Outside stakeholders might be exactly what your business needs to rise to a higher level of success.

Venture capital: These investors will want a say in your business and may even have an ultimate goal of wanting to sell it in the future to gain their financial returns.

2. Explore borrowing and leasing options

To improve your cash flow, look into the borrowing and leasing options available from your financial institution:

  • A line of credit is ideal for shorter-term financing requirements - you can access hundreds or thousands of dollars to pay your immediate expenses.

  • A credit card for short-term business expenses - you can get a 25-day payment grace period before interest is charged on purchases with a Meridian business credit card.

  • A business loan for longer-term to finance things like expansion plans or hiring additional staff.

  • Equipment financing to get the gear you need without spending all of your available cash.

Want to learn more about these financing options at Meridian? Talk to a Meridian Business Advisor.

3. Look for alternative financing

Check out these alternative sources of financing to get the money you need:

  • Apply for a loan that’s 85% guaranteed by the federal government through the Canada Small Business Financing Program (CSBFP).

  • Get financing for specific actions like taking your business online, paying off taxes, buying more inventory or launching a marketing campaign through Meridian’s partnership with Thinking Capital.

  • Ask friends, business colleagues, and organizations to lend or give you what you need - maybe you could borrow furniture or equipment!

  • Consider using popular crowdsourcing platforms like Kickstarter or GoFundMe to raise money to fund projects or launch new ventures.

Examine your cash flow strategy

Once you’ve taken immediate steps to increase cash flow, examine your long-term cash flow strategy to make sure you’ve always got enough cash to operate. Checking in on your strategy is always a good practice - especially when the market changes.

Here are a few things - big and small - you could consider:

  • Pivoting to a different business model

  • Offering new products or services

  • Pursuing another customer market

  • Reducing customer credit

  • Tightening customer payment terms

  • Opening a line of credit

  • Adding overdraft protection

One last tip - and some next steps

Having enough cash to operate is key to business success, so it’s worth the time and effort to explore all available financing options. Consider combining some of the options we’ve discussed in order to raise the amount of cash you need to operate your business smoothly – for example, borrowing some money from friends and getting the rest with a business loan from your financial institution.

So, ready to start exploring your cash flow financing options? Here’s what to do next:

  • Forecast your monthly sales for the next 6 to 12 months as well as you can – be conservative with your estimates.

  • Once you know how much you need, and when, approach the financing sources you prefer.

  • Be prepared to explain how you’ll use the money to any financers you approach.

  • Explore financing options and get answers to any questions you have by connecting with a Meridian Business Advisor

Learn more about managing your business

How to build cash reserves for your business
Building success together: Helping our Members overcome pandemic challenges
9 tips to protect your business from fraud