Updated: Wed, 01/23/2013 - 01:11

Smart cash-flow management

special photo - Pam Parker
special photo - Pam Parker
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As the local economy continues to improve in 2013, cash flow management remains one of the biggest ongoing challenges for large companies and small businesses.

The key to successful cash management is to make sure you’re using your cash flow efficiently. It’s important to analyze your overall business cycle and to examine vendor relationships, terms and creditors. A knowledgeable commercial banker can offer helpful advice to help your company reach its fullest potential.

Here are a few tips to help maximize your company’s cash flow:

Create a cash reserve to get through the lean times. Having quick access to working capital can help your company “bridge the gap” when accounts receivable are slow. Setting aside a modest cash reserve can be a smart strategy for a business of any size.

Open a line of credit.

The U.S. Small Business Administration’s newly-revamped CAPLines program provides strategic options for small businesses to finance contracts, expand inventory and access working capital with competitive market interest rates. The CAPLines program has been restructured to help banks finance growing companies’ short-term cash needs through an SBA-backed revolving line of credit.

Consider applying for an SBA loan. Many local banks can offer Small Business Administration loans that have more flexible terms and conditions because they’re backed by a secondary guarantee. The SBA offers loan programs addressing a wide range of small business financing needs.

The SBA 7(a) Loan Guaranty Program, the SBA 7(m) MicroLoan Program and the SBA 504 Loan Program meet different business needs, so speak with a lender before you start your application. Refinancing through an SBA loan can be a strategic way to lower your interest rate or even amortize your debt to create a lower monthly payment, effectively generating a stronger cash flow.

Think about opening a sweep account. This special type of bank account automatically transfers amounts exceeding a designated balance into a higher interest-earning investment option at the close of each business day. Typically, the excess cash is swept into money market funds. These accounts help your cash work for you by earning modest interest rates.

Talk to your banker to determine which account works best with your current business needs.

Don’t depend on credit cards with high interest rates to float your company. If you’re borrowing money short term for long-term needs, you’re going to put your business in a cash flow bind. Many business owners fall into this trap by financing their companies through their credit card. A credit card’s high finance charges and interest rates might make the cost of borrowing money much more expensive than you initially realize.

Surround yourself with experts. Your attorney, accountant and local banker can all offer helpful advice to help you make smart business decisions, freeing you to run your company and do what you’re most passionate about.

Now is an ideal time to talk with your banker about how you manage your cash flow and your debt structure. Remember that your banker should serve as a valuable resource, providing customized information, solutions and strategies to help your business succeed.

Pam Parker is the senior vice president and commercial banking division manager at The Coastal Bank. She can be reached at 912-644-1653 or pparker@thecoastalbank.com.

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