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An Introduction to Working Capital and Cash Flow


If you own and operate a small business, you know how important critical thinking skills, time, patience and dedication are. These aspects are essential for running a successful business, but you must additionally have proper knowledge and understanding of how other things work. For instance, it is imperative to know the difference between cash flow and working capital if you want good decisions to be made for your business when lenders and business partners prepare financial statements. However, many people utilize the two terms interchangeably, and that can lead to misunderstanding and negative decisions.

To make sure your business continues to run well, you must understand the details and aspects of each term so that you use them correctly. Firstly, you should understand what cash flow is and what a cash flow summary is used for. Take a certain amount of time, such as a month or week in your business into consideration. In that week or month, how much money can your business generate to cover your expenses? This is referred to as a cash flow summary, and cash flow is how much cash is coming in and moving out of your business. Typically, you will generate one of these summaries for a quarter or perhaps a year. It is important to note that this summary will not take your assets into account and it will now show how they can impact your business’s financial responsibility. In essence, the cash flow summary is for determining how much money can come from your business in a certain amount of time.

Working capital, on the other hand, is different and can show your other things. For instance, it involves liabilities and assets. While cash flow accounts for expenses, working capital has the ability to show you the comparison between your outstanding debts and your current assets. In order to better understand this difference, take this example into consideration. If you currently have a loan of 5,000 dollars and your customer base starts to decline for whatever reason, you will still have to make payments on that loan. How working capital helps is that it will show you which assets can be liquidated to resolve your debt. So, if you are experiencing a sudden decline or a tough time, you can use the capital report to your advantage to help you pay the debt. Now that you know the difference between these two business terms, you can ensure you are making good financial decisions.

How to Manage Small Business Finance Situations

cashflowAny business can get into a financial mess, but when you run a small business, it is easier to mix your personal finances with your business finances. You may borrow money from your personal account to pay for a business expense and forget to pay it back. You may use a company account to take your spouse to dinner and lose the receipt. All of these back and forth transactions can cost your company and yourself a lot of money if you’re not careful. The following are some ways that you can manage your small business finance situation.

The first thing you should look into is what type of payments you accept for products or services rendered. If you have invoices that get paid in 30, 60 or 90 day increments, you could find yourself turning to your personal account to make up the difference. Fortunately, you have some other small business finance options. Accounts receivable financing is just one of those. With this type of loan, you will get the money you need right up front. It’s like selling an asset to the financier, and you receive the financial benefits.

Something else you can do to manage the finances in your small business is to keep good records. Keep track of all your invoices and receipts for both incoming and outgoing purchases. This is good not only for you to project future business through real reports, but could save your bank account if you are ever audited by the IRS. Without proper documentation of your business finances, it could be hard to see if you are making money, losing money or just breaking even.

Growing your business can be difficult without the funds you need to do it. One smart way to manage your money as you try to achieve growth is by speaking with a financial expert about what types of loans will be beneficial. If you’ve got a short term project that will really boost business, but costs more than you can handle at the moment, ask about an unsecured business line of credit. If you want to move to a bigger building, but haven’t sold your initial property, look into a bridge loan. There are a lot of options that allow you to keep your personal finances at home, but still be able to see the growth you hope for.

Managing finances in any business can be a challenge, but by keeping your personal and business funds separate, it could be lots easier. Speak to a loan officer today to see what options you have to better manage your small business finance situations.

Keep Your Business Up and Running With Proper Cash Flow

Commercial FundingCosts can quickly accumulate and take over if you don’t know how to handle cash flow in a business. Financial experts can help you to control the situation with appropriate steps that will improve the way you handle the exchange of money.

Some of the first things you should look at are your debts. Do you carry a lot of debt, making it difficult to afford your monthly payments? The good news is you can speak to a loan officer about debt consolidation. When you put all of your high monthly payments into one loan, it creates a lower payment that is easier to handle. This frees up cash for you to use as needed in your company.

Something else to consider when looking to improve cash flow is your payment system. An online payment system is both time and cost effective for you and your customers. There are a lot of programs available that allow customers to pay right when they place an order. This cuts down on time trying to collect payments, and will make your customers happy as well. As a company, you will not have to sit on inventory until the checks come in through the mail. Rather, you can jump on the orders right away.

Cash sometimes disappears quickly when it comes time to pay taxes. If you stay up to date and know when they’re due, you can arrange payments and other expenses so you don’t run into any problems. The same is true for bills that come due regularly. It’s not too hard to put together a schedule of payments, which could include bills and taxes, so you never put yourself in a situation where you can’t pay something. Of course, if you find that the due dates are coming near and you are not able to pay them, you may be able to get a loan to help out. Accounts receivable financing, purchase order financing or asset based lending are all options that will help your cash flow improve quickly so you can get those bills paid.

More and more companies are finding ways to improve their cash flow. If you feel you need some help, a financial expert might be someone you can turn to in order to gain direction. From debt consolidation to purchase order financing, there is always something you can do to improve the cash coming in and be smart with the cash headed out. Consult a loan officer today to find out which loan option is right for your business.

The Biggest Advantages Of Equipment Leasing


There is a seemingly endless debate among business owners over whether it is better to own or lease equipment. Proponents of owning equipment state that it gives businesses assets that they can use as collateral for additional funding, and they have access to that equipment whenever they need it. However, equipment leasing has a number of big advantages that many entrepreneurs often overlook.

No debt on balance

While owning equipment can be a good investment for a business, it usually requires a large payment upfront, which means taking out a loan. Equipment leasing, on the other hand, is a monthly expense that does not require the large upfront sum. Loans are marked as debt on the balance sheet and can severely impact a company’s credit rating. Because equipment leasing is considered a regular expense like rent and utilities, the credit rating remains intact, and there is zero debt on the balance sheet – leaving business owners with the ability to seek financing for other aspects of their business.


When purchasing any equipment, the value begins to depreciate the second it is delivered to our business. Having equipment serve as assets is great, but it should be noted that the value of those assets decreases as they are used, and then that equipment needs to be sold and more money needs to be spent in order to get newer or replacement models. Equipment leasing gives business owners the option to upgrade their equipment at the end of the leasing terms. This means that businesses will always have access to the latest equipment, without the worry of having to offload depreciating assets or eating the cost when upgrading.

Tax benefits

When a company purchases equipment, they can claim depreciation every year on their tax return. On the other hand, equipment leasing payments are fully deductible, according to Section 179 of the IRS business tax forms. This allows business owners to recoup money every year, which greatly offsets the cost of equipment leasing.


Equipment leasing agreements have two major credit benefits. First, because equipment leasing is a low monthly expense, business owners can preserve their lines of credit and use those funds for other projects and expenses. Contrast this with purchasing equipment, where business owners use existing lines of credit to finance the initial purchase. Second, equipment leasing gives business owners the opportunity to improve their credit rating. By paying the equipment leasing invoices on or ahead of time, a company’s standing with credit agencies improves, which opens the door for business owners to apply for lines of credit with higher spending limits. Paying equipment leasing bills in a timely manner also counts toward being able to access larger loan amounts when lenders look at financial histories and credit reports.

While there is no definitive answer as to whether equipment leasing is better than purchasing equipment, the former certainly has a number of financial benefits that business owners can take advantage of immediately.