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Are you familiar with the "Cash Flow Crunch"? When you have to purchase supplies and/or require cash to meet payroll but your accounts receivables are late, then you can discover yourself in a Cash Crunch. This is when a line of credit or revolving loan set up with a bank can make a difference! If you have not planned for such an emergency, the following may assist you in an emergency:

• Factors
• Target Unpaid Receivables
• Lease-Back Your Assets
• Credit Cards
• Juggle Bills
• Cash Conversion
• Service Business Looking For A Line Of Credit
• Cost-Control Basics For Improving Cash Flow
• Loans and Lines Of Credit

Factors

Factors will quickly buy your receivables for cash -- often within 24 hours. You often pay a high price, some times as much as 15+ percent of the value of the receivables, but cash can be aquired even overnight. In addition, in most cases, factors generally take over all paperwork and accounting aspects of managing the receivables for you.Also an important "factor", factors are usually confidential, allowing you to keep your cash flow needs confidential. Factors can be found in , the yellow pages under "commercial finance companies".

Target Unpaid Receivables

If your problem is that their are those whom have failed to pay, offer to reduce their debt by 15 or even 25% if they pay within the week.

Lease-Back Your Assets

You can try to find a leasing company that is willing to buy your equipment and lease it back to your company. But remeber, once you do this the leasing company will own the equipment,

Credit Cards

Though Credit card debt carries much steeper interest rates than bank loans or lines of credit, Cards such as American Express can come in pretty handy for short term cash flow problem. Remember to treat credit card debt as short-term debt and repay it within a few weeks.

Juggle Bills

Though suppliers may forgive a late payment or two, your employess will quit is not paid. Contact creditors and arrange to pay only a part of the outstanding balance for the month in question. 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.

Cash Conversion

How many days does it take for your customers to pay you. How many days does it take to make your product and how long does it sit in inventory before it's sold. How many days do you have to pay your vendor.

To arrive at the answers, use the formulas below:

Accounts-receivable days:
your receivables balance, divided by the last 12 months' sales, multiplied by 365.

Inventory days:
your inventory balance, divided by the last 12 months' cost of goods sold, multiplied by 365.

Accounts-payable days:
your payables balance, divided by the last 12 months' cost of goods sold, multiplied by 365.

To figure out the cash conversion cycle, add the receivables days to the production and inventory days, then subtract the payables days. That will tell you the number of days your cash is tied up and is the first step in calculating how much money you'll want in your revolving line of credit.

Service companies
If you run a service business and are looking for a line of credit, your banker will be looking at one thing: your receivables management. Because a bank will generally give you a credit line of up to 70% or 80% of the value of your current receivables, the balance of your financing needs will probably have to come from equity.

Cost-control basics

You can maximize your billing and collection procedures by collecting outstanding receivables within 30 to 40 days. Remember NOT to pay your own bills too quickly. Do NOT schedule bill payments BEFORE their due date unless you receive a significant discount. Use an electronic method to pay your fixed monthly to be sure that you time your last-minute payments.

Loans and Lines Of Credit

• Term Loans are often appropriate when the money is needed for a specific and limited purpose, such as purchasing equipment or making capital improvements. Term loans offer your company the full amount of the loan up front. The money is then repaid in prearranged monthly installments throughout the duration or "term" of the loan. The term can range from 1 to 15 years. Interest is charged on the outstanding balance of the loan, and interest rates are usually fixed.

• Lines of Credit give businesses the option of borrowing as much money as they need, whenever they need it, up to a prearranged maximum amount. Interest is charged only on the outstanding balance, not on the unused portion of the line of credit. Interest rates are usually tied to the Prime Rate. A line of credit is generally open for one year, with annual renewals at the lender's discretion.

• Business Credit Cards are a convenient means of financing for many businesses. Business credit cards offer the flexibility and widespread acceptance of personal credit cards with generally higher credit limits and lower rates.

• SBA Loans are loans that are either guaranteed by or are financed in part by the U.S. Small Business Administration. The SBA is the primary financial backer of business financing in the United States, with almost $11 billion in loans awarded annually. By guaranteeing or financing portions of a loan, the SBA enables participating lenders to fund loans that they may not have otherwise granted.

• Commercial Real Estate Loans are for the purchase, new construction or refinance of commercial, industrial or investment property. They are generally available for up to 75% of the property value and can be extended for up to 25 years. As with residential mortgages, commercial real estate loans can have fixed or adjustable interest rates.

• Factoring means that a lender pays your business the money your customers owe you (the amount of your accounts receivable), in exchange for a percentage of these funds. For a larger percentage of the funds, the lender may actually assume the responsibility for collecting your outstanding receivables. Factoring enables any business to obtain immediate, short-term cash (and thereby improve cash flow), without diluting equity or incurring long-term debt.

• Equipment Financing and Leasing allow businesses to obtain business equipment, including computers, vehicles, tools, machinery and more. Generally, the equipment serves as collateral, so often little or no money is required up front. Businesses can then purchase the equipment they need even if they do not have the cash on hand to pay for it.

  Equipment loans and lines of credit enable businesses to purchase the equipment outright. The business takes ownership of the purchased equipment.

  With a lease, the lessor purchases the equipment and allows the business to use the equipment in exchange for a (usually fixed) monthly payment. Although the lessor owns the equipment throughout the duration of the lease, some leases are structured to allow the business to purchase the equipment when the lease expires.

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