What You Need To Know About Cash Flow
Running a new business can be exciting, but it can come with its share of challenges, too. One of these challenges is often making sure that you manage your finances properly, which can be particularly tricky when just starting out. The good news is, though, that with a little research and effort it can be possible to make your financial path a lot smoother.
What Is Cash Flow?
One financial aspect that it’s important to understand when getting a new business going is cash flow. Cash flow refers to the amount of working capital that goes in and out of your business. Your ability to generate cash flow often indicates the company’s overall value. Additionally, it is desirable to have a positive cash flow, because this generally means that your business is making more than is going out. A negative cash flow can quickly lead you to situations where you are in debt.
Different Types of Cash Flow Loans
When your business is just getting started, your cash flow is important. You need regular cash flow not only to pay your bills, but also to pay employees and make purchases that can help your business grow. Without proper cash flow your business may stagnate, or could even fail. Because it is sometimes difficult to have a steady positive cash flow early on, many may opt to get a cash flow loan. When it comes to loans to improve cash flow, there are two common types that businesses get. One is a merchant cash advance, or MCA. With this kind of loan, a lender will often look at the volume of credit card payments that you have coming in on a regular basis as a way to determine whether or not they should offer you a loan. Another common type of loan for boosting cash flow is an automated clearing house, or ACH loan. With an ACH loan, the lender typically looks at the average daily balance of your business bank accounts, rather than credit card transactions.
The Bottom Line
While running a new business can be exciting, it can often come with its share of challenges, as well. One of these is often making sure that you have your finances properly sorted out. The good news is, that with a little research and effort, it can be simple to choose the financial path that makes the most sense for you and your business.