CASH IS KING …

CASH IS KING …

Everyone has heard this phrase sometime in their business life and it truly is reality when it comes to owning your business. A person could have the best business idea and company in the world but if you don’t have proper cash flow or you don’t use your financial resources correctly you will end up in the same pile as all the dot.com companies a few years ago. These dot.com companies received huge amounts of cash when they went public but they spent all these monies on fancy furnishings and other equipment instead of holding onto some this money for a rainy day and yes that rainy day came in a down pour. Companies should look at leasing their equipment acquisitions to preserve their capital. There are many different types of leasing companies in the Canadian marketplace for just about every type of asset and just about every credit. We will get back to the credit issue a little later on. Not only should a business and sole proprietors are lumped in here with all other business structures should not only look at leasing their equipment, but they should also look Factoring their business to business receivables to ensure their cash is available when they need it not when your receivable decides to pay you. For instance there are some companies out in the marketplace that have taken 90 to 150 days to pay, but if you were to Factor your receivables these companies normally pay in the 30 day allotment because if they do not then their credit worthiness gets hurt … not yours! Factoring is based on your client’s creditworthiness not yours which is the main difference between Factoring your receivables and a traditional bank line of credit. Don’t get me wrong there are many other differences as well that we have covered in previous articles in the Business Investor magazine. A person just one day in business can Factor their receivables whereby a bank generally requires you to be in business for at least 2 years before they will even look at you for a line of credit. A new business person’s cash is no different than a company’s cash that has been in business for 5, 10, 20 or more years in fact in many instances it is more critical to get your cash when you need it most. Not only is CASH KING, but also your credit rating is the KING MAKER because you can have all kinds of cash in your company and have no credit you are not going to be able to access the required cash your company needs to grow (except you still qualify for Factoring of your Receivables). Too many people squander their credit worthiness in their youth when credit is easy to get or sometimes your credit gets damaged due to a failed business. There is no shame in trying a business and having it fail than to sit in your armchair and say someday I’m going to try this business and never do it. All in all we always still need to watch our credit ratings as the financial industry is becoming more automated and if you do not have the right Beacon Score on your credit bureau do not qualify for the money you seek or if you have a low score you are going to pay a much higher interest rate than you were prepared to pay. Sometimes the amount of the interest rate you are required to pay will jeopardize the business you are trying to start or expand. So remember CASH IS KING but CREDIT is the KING MAKER. For more information please contact Mr. Terry Reid of CapitalLinx International.