When you need to boost your company's liquidity

When the renovation becomes more expensive than planned, when the unexpected happens or simply when the company needs an injection to reach the next peak. Then liquidity can become a barrier to growth.

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What is liquidity and how to increase it in the company?

Liquidity is a measure of your company's short-term solvency, or availability of cash, relative to short-term liabilities, such as a supplier debt. Improved liquidity means, in short, improved solvency. For example, if the company incurs unexpected expenses that exceed its short-term solvency, liquidity problems arise.

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Common with temporary liquidity problems

In some industries, revenue varies widely depending on the season. For example, many service and tourism companies are fully booked during high season, only to have almost no customers at all a few weeks later. As a small business owner, it can be difficult to deal with these big swings. In addition, sometimes the weaknesses become deeper than budgeted for, which causes problems.

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Liquidity problems in the off-season can be doubly problematic, as this may be when you have time to invest — so that way you can grow at peak times.

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Then a loan might be the solution. Think carefully about the need before you borrow so that you are sure you can repay. Just borrow exactly what you need.

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When the unexpected happens

Small businesses are particularly vulnerable to unexpected expenses. The consequences are often greater the longer it takes to find a solution. The cafe owner whose awning falls down in the middle of peak season needs a new awning immediately to make the impact as small as possible. The restaurant owner with an oven that has broken down needs help immediately.

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If you haven't had time to build up a buffer for unexpected expenses, external financing is an opportunity that gives you quick access to cash when the unexpected happens.

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Sometimes wise to settle accounts payable with loans

Unforeseen events can set it up properly and it can get really boring when you find it difficult to pay your supplier invoices. A business loan is often a better solution than risking the company's relationships with a non-payment. If you run an otherwise well-run business, settling single accounts payable with a loan need not be a problem.

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Increase liquidity with a loan -- but consider this

If you run a small business that suddenly loses turnover or has unresolved accounts payable, you should carefully analyze what it is due to. Some things to ponder might be:

1. How are the competitors doing?
2. Does the downturn only touch you?
3. Do you have a profitability problem that can be corrected?

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Maybe you need to invest in order to reach more customers. This could be a new product, new equipment or marketing to an important customer group to increase sales. Think carefully about the need before you borrow. Are you sure this particular investment is the right one? Count on your space to repay the loan.