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Using alternative lending products for cash flow management

Aug 06, 2013 Sean Albert

Working capital is often cited as the most important component of continued operations in the enterprise, and several economic issues have put stress on the small business sector as a result. However, there are a variety of ways in which entrepreneurs can better manage cash flow, especially through the use of alternative financial services, such as new lending programs from non-traditional institutions.

As a result of the financial crisis, alternative lenders have proliferated rapidly, creating an ever-increasing expanse of options for businesses of all sizes and types. In addition to taking advantage of some of these programs, business owners can also take several steps toward more consistent working capital and stabilized finances.

Tips and tricks from a pro
Rohit Arora, CEO of Biz2Credit, writing for Fox Business, recently listed several of the best practices small business owners should know when working to manage cash flow. According to the expert, the first step is to get a strong handle on accounts receivable and payable, and evaluate any wasteful processes from these functions to get the clearest view of real cash flow.

Invoicing right when a transaction is made, giving clients incentives for making payments more quickly, demanding down payments when necessary and factoring when the receivables are too much of an issue will help improve cash flow management. He stated that small business owners who are pressed for cash should also look into emerging markets and other new areas that could yield at least some revenues.

Arora asserted that a small business credit line is an essential component of continued financial stability, as no company will be safe from at least some cash flow issues down the road. This is especially true for startup firms, which will often experience problems related to their age, such as not being able to get a quick approval on a standard business loan.

Leverage alternative loans
Alternative lending products provide entrepreneurs with an opportunity to access the credit they need in a timely fashion, as the turnaround on applications is quicker when coming from these institutions than traditional banks. Additionally, approval rates are much higher among alternative lenders, consistently above 60 percent, compared to less than 20 percent coming from traditional banks.

Entrepreneurs should also consider investing in advanced technology that is capable of reducing wasteful expenditures, boosting productivity and streamlining overall operations management, such as big data and cloud computing solutions.