Having a low credit rating can prevent us from doing many things, from borrowing more money to even getting a phone contract. When it comes to personal finance, managing situations can be difficult with bad credit, so for business owners and entrepreneurs, the situation can be even more complicated. Continuous cash flow is your lifeblood, whether you are an employee, a retired individual, or business owner. No matter who you are, you need to keep it flowing to keep up with expenses and essential investments.
Here is our quick guide on how to manage cash flow with bad credit.
6 Tips For Continuous Cash Flow Even With A Bad Credit Score
1. Find Specialist Lenders
There are many types of lenders available and not all can help when you have poor credit. By discovering specialist lenders who can help those who may have a bad credit history, you can increase your chances of finding emergency cash. In terms of personal finances, this could be bad credit payday loans that are designed to provide quick cash to cover emergency expenses. These are for personal expenses only, so finding specialists who can provide business loans that consider a poor credit rating, such as some start-up loan lenders, is better. Many business loans may be off limits for those with poor credit, so this will need to be considered.
2. Review Expenditures
If cash flow is becoming a problem, it is a good idea to review current business expenditure. You may discover some expenses that are no longer required that are regularly leaving your business account. It is best to be as thorough as possible as this will ensure you see a full view of your finances. You can then compare this with your current income and see how much you will need to reduce. If you purchase stock from suppliers, for example, it will provide a chance to see where savings can be made. You could find a cheaper supplier for similar quality, cutting costs and improving cash flow. Seeing where expenditure can be reduced will avoid having to borrow money when you may not be eligible due to bad credit.
3. Lease Instead Of Buy
It can be more expensive to buy outright any business equipment, especially when doing so in bulk. Maybe you are looking to invest in hardware for a whole office, amounting to a large expense. Rather than buying all of this equipment to own, it could be a better option to save money with leasing or hire purchase. Some lenders can still help you do this with bad credit, but it may restrict you on how much you can put on credit. Look into options to hire rather than buy with many of your business expenses and see how this can improve cash flow.
4. Streamline Processes And Increase Pricing
As your business grows, the number of different processes you have in place may increase. For larger businesses, you may have large departments that could be streamlined. This can mean in terms of staffing levels or responsibilities. Ideally, you don’t want to be in a position to make any drastic changes, especially as business can improve quickly. What you can also do is speak to suppliers and review the prices you charge for products and services. That way, you could increase pricing in the right areas and reduce expenditure to suppliers. This doesn’t have to be a permanent switch and can be temporary until cash flow improves.
5. Promptly Chase Invoices
Depending on how your business currently invoices, you may have some delays when receiving payment. Whilst there may be clients that provide payment always on time, others may historically take longer, leaving you potentially short on cash flow. The difficulty with this is if you already have bad credit and payments are not arriving on time, this could have a knock-on effect with maintaining your essential bills that will further impact your credit rating. Therefore, it is important to follow up promptly with any overdue payment and work towards receiving all outstanding invoices around the same time each month. Without doing so, your business will continue to find it difficult knowing exactly when money will come in, making it tougher to forecast revenues.
6. Incentivise Early Payment
One way to help clients and customers be aligned with payment dates is to provide incentives. You could provide a discount for early payment, for example, helping those that either forget invoice dates or are just slow with doing so, pay quicker. This is particularly helpful if you need funds earlier in the month to help with expenses, especially any planned one-off expenditure. If you have a current policy of allowing clients 30 or more days to pay their bills, review this and see if you can reduce the window, prompting faster invoice settlement. If you currently do not have many options for receiving repayment, look to provide more online payment options to help.
Bad Credit Cash Flow Conclusion
Getting control of cash flow issues is important, especially if you can do so before it happens. When you have bad credit, it means borrowing options may be limited, so making changes throughout the business can help alleviate the strain. It's time for your business to keep the cash flowing and the credit score growing!
