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When Credit, Not Cash, is King

Laura Rich Co-founder, Recessionwire Recent Posts

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May 14, 2009

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Business Forecasting 2012

Our special feature on forecasting sheds light on how to choose the right model, offers advice from Jack Stack and more.

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The lag between delivery and payment has never been ideal. But in tough times, it can get worse, as the domino effect of cash flow hits your supplier – and then you. No doubt you have some reserves on hand (right?) for rainy days like this. But credit options are always available for those who qualify.

It’s up to you to decide if and when you want to opt for credit over cash, but don’t forget, use of credit can help keep your credit history in good standing, even if you’d rather keep the debt to a minimum in these times. Here are three tips for using credit to help you manage your cash flow and get back to the work of delivering great products and services.

Buy everything on credit. Sound radical in a period that was being called a “credit crunch”? If you can get it – and most can (Obama’s relief and recovery plan is favorable to small businesses, and the regional Fed boards report there’s been a steady issuance of commercial loans by banks) – use it.
New lines of business. Considering a new product line or expansion? That’s great news in this recession. But it’s recommended that you lay out with credit in the beginning since you will generally not be bringing in cash on your new line immediately after rollout.
New partnerships. Don’t wait for the cash to come around when a hot business opportunity comes up. That’s what your credit line is there for. Seize the day.
All business-personal expenses. Credit cards often come with perks – miles, points, cash back, etc. Therefore, use of these cards can help you put cash back in the company, whether it’s to use miles for business travel, points toward gifts for employees and customers or cash to drop into your business’s bank account.

Ultimately, strategic use of credit will not just keep your business humming in the short term. It could help you save money later by putting you in good standing with your suppliers.