Research has shown that 70% of businesses fail after one year. Many experts suggest that poor personal liquidity on the part of the business owners might be responsible for these failures. Realising how critical funding and access to cash are, business owners are constantly exploring different ways to improve their liquidity.
So how can an entrepreneur boost their personal liquidity? In this article, we will list and enumerate the most effective strategies you can use to boost your liquid funds and avoid bad credit loans. Our list will be based on research, surveys and personal experiences.
1. Personal Funding
Many startups are launched by high school and college students. A survey showed that the young founders bankroll their own startups, with little or no external support. Personal liquidity is often a problem even when the business is flourishing. This is often because these young startup founders have to grapple with student loans, insufficient savings and other financial problems.
Despite these challenges, student entrepreneurs can boost their personal liquidity via student loan debt consolidation or attractive refinancing options. Make sure you find a company that has very fair loan options. Don’t forget, your goal is to pay off your loan quickly and easily.
2. Re-assess Your Overhead Costs
Most business owners fail to improve their personal liquidity because their business overhead costs are too high. If you’re struggling to increase your liquidity, perhaps, you need to consider reducing your overhead costs.
Business experts have revealed that reducing overhead costs can increase business profits. Save costs by taking advantage of low advertising options, low rent offices, contract staff and so on. With time, you will find that your business will have healthier liquidity.
3. Get Rid Of Unproductive Assets
Assets are acquired to boost revenue generation. But sometimes, assets degenerate into liabilities. If you have assets that aren’t generating revenue, then you need to get rid of them.
Successful businesses often conduct auction sales for assets that aren’t as productive as they should be. You should take a cue from them. Go through your inventory of buildings, stores, vehicles and computers. Sell the outdated and worn out assets. Maintaining outdated assets often negatively affect liquidity.
4. Loans For SMEs
The times have changed. Many finance companies have stepped in to fill the gap in the financial sector. Small businesses can easily acquire loans without having to worry about their credit history or the age of their businesses.
Small business loans are clearly a good way to improve your personal liquidity. But before you approach one of these loan providers, there are a few things, you need to look out for.
- Find a reputable company that simplifies the loan application procedures. Be sure to go for companies that offer low-interest rates and reasonable terms and other attractive loan options.
- Seek out companies that believe in young entrepreneurs and are willing to take a chance on starters. The low personal credit scores don’t deter such companies. And although such companies tend to provide solely short term loans, they tend to make very strong business partners. Their only requirement is that you have a good organization that has been in business for at least twelve months.
5. Microfinance Banks and Cooperatives
In some parts of the world, microfinance banks are established specifically to refinance small businesses. Gone are the days when startups couldn’t operate without the help of the big traditional banks. Many entrepreneurs went through hell while trying to secure loans to expand their business inventory.
According to research studies, many businesses lose billions of dollars because they lack the necessary financial resources required for growth and expansion. Thankfully, micro-lending banks provide significant loans for entrepreneurs who want to expand their inventories.
These loans often have very attractive options. Entrepreneurs seeking to boost their business liquidity can explore the micro-lending options available to them.
6. PPP Refinancing or Peer-to-Peer Loaning
As you already know, many traditional companies have preset guidelines for eligible companies. For instance, the company must have existed for a certain length of time, and it must be low-risk too.
Many companies will not meet these minimum requirements. There are still other liquidity-boosting options too. Peer-to-peer lending is one of them.
Peer-to-peer lending has been around for a long time. In fact, it has even found its way to the internet. Young entrepreneurs can find investors on reputable Fintech sites. It’s a great way to boost your liquidity and to business networks. What’s more, you are likely to get these loans on very attractive terms.
7. Accounts receivable and Accounts Payable
You can improve your personal liquidity by paying close attention to your accounts receivable. and accounts payable. Most business owners lose money as a result of negligence. Ensure that your clients are billed at the right time and that payments are received as at when due.
Business experts also recommend longer payment terms. Successful business moguls have told stories about how they increased their personal liquidity by negotiating longer terms with their vendors. This way, your business will always have the money available.
Boosting your liquidity helps to keep your business running effectively. It shouldn’t be a problem if you follow the seven aforementioned tips.
Another thing to do is to reduce the rate at which you withdraw cash for non-business purposes. If possible, maintain a separate account for the business and another for your personal income. Also, take time to look through your products and services. If possible, take steps to add value to them. Look at your competition and decide if you should increase your prices marginally.