Cash flow crunches affect every business. Ideally, you can weather these crises by accessing a line of credit or revolving loan you’ve already set up with your bank or tapping into cash reserves you’ve put aside for such an occasion. But what can you do if you’ve failed to plan ahead?

Here are some triage techniques to help get you through such an emergency:

  • Factors
  • Target unpaid receivables
  • Ask a supplier for a loan.
  • Lease-back your assets
  • Credit cards
  • Juggle bills


Factors will quickly buy your receivables for cash — often within 24 hours. You pay a high price, often as much as 15% of the value of the receivables, but you can get cash literally overnight. Once factors purchase receivables, they generally take over all the paperwork and accounting aspects of managing them. Since sales to factors are usually confidential, you can keep your cash flow woes quiet. To find a factor, look in the yellow pages under “commercial finance companies.

Target unpaid receivables

Turn first to reliable, long-term customers who have historically paid on time. Ask a couple of your best customers if they’d be willing to pay their bills, or a portion of them, early. Be upbeat and honest — tell them that you’re tight on cash and would appreciate it if they could pay you now. Consider offering the customer an incentive for early payment — perhaps 1% or 2% off the total bill.

For clients with very old debts, offer to forgive 15 or even 25 of their outstanding balance if they pay within the week. This is not a cheap solution, but no more expensive than some debt options. And it may net you money you’d never see otherwise.

Ask a supplier for a loan

Is your business a major account for any of its suppliers? If so, consider asking the supplier for a loan. Go to regular, long-time suppliers (who aren’t also competitors) first, and emphasise that this is a blip. Because you are a steady customer for their goods and services, suppliers have a built-in incentive to help you stay in business.

Show your appreciation by paying them promptly once the crisis has passed.

Lease-back your assets

While your office furniture, computers, phone system or other equipment has cash value, you can’t just sell it off and still operate your business. What you can do, however, is find a leasing company that is willing to buy it and lease it back to you. The money you get will be based on the value of your assets, and you can expect the leasing company to charge you a high premium. Use this option carefully. Since the leasing company — not your business — will own the equipment, it probably won’t hesitate to take it back should you miss payments.

Credit cards

Skilfully managed, credit cards can eke you through a cash flow crisis. But be careful: entrepreneurs who have successfully bootstrapped their companies on credit card debt are more the exception than the rule. Credit card debt carries much steeper interest rates than bank loans or lines of credit. And unless you repay the money quickly, hefty monthly payments will put future cash flow in jeopardy.

If you have no other choice, treat credit card debt as a short-term loan and repay it within a few weeks.

Juggle bills

If you fail to pay your employees, chances are they’ll quickly start to look for work elsewhere. Suppliers, on the other hand, may be quick to forgive a late payment or two. Call your creditors and ask for a grace period or arrange to pay only a part of the outstanding balance this month. Closely examine your bills to determine which ones you must pay, and which ones can wait. Pay those creditors who are most crucial to the continuation of your business first, and others later.

Don’t, however, simply skip a payment; be sure to explain your predicament to the creditor first.

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