When you need to boost your company's liquidity

When renovations are 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 an obstacle to growth.

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What is liquidity and how do I increase it in my company?

Liquidity is a measure of your company's short-term ability to pay, or access to cash, in relation to short-term liabilities, such as accounts payable. In short, improved liquidity means improved ability to pay. For example, if the company incurs unexpected expenses that exceed its short-term solvency, liquidity problems arise.

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Temporary liquidity problems are common

In some industries, revenues vary greatly depending on the season. For example, many service and tourism businesses are fully booked during the high season, only to have hardly any customers at all a few weeks later. As a small business owner, it can be difficult to manage these large fluctuations. And sometimes the downturns are 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 - and thus grow in the peak season.

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A loan could be the solution. Think carefully about your needs before you borrow to make sure you can pay back. Borrow only for exactly what you need.

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When the unexpected happens

Small businesses are particularly vulnerable to unexpected expenses. The longer it takes to find a solution, the greater the impact. The café owner whose awning falls down in the middle of the high season needs a new awning immediately to minimize the impact. The restaurant owner with a broken oven 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 option 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 throw a spanner in the works, and it can be really annoying when you have trouble paying your supplier invoices. A business loan is often a better solution than risking your company's relationships with a non-payment. If you run an otherwise well-managed business, settling occasional accounts payable with a loan need not be a problem.

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Increase liquidity with a loan - but keep this in mind

If you run a small business that suddenly loses turnover or has unresolved accounts payable, you should carefully analyze the reasons for this. Some things to consider could be:

1. How are competitors doing?
2. Is the recession only affecting you?
3. Do you have profitability problems that can be corrected?

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You may need to invest to reach more customers. It could be a new product, new equipment or marketing to an important customer group to increase sales. Think carefully about your needs before you borrow. Are you sure this particular investment is right? Calculate your capacity to repay the loan.