How to Keep Your Small Business Afloat When Cash Runs Low

For many business owners struggling to stay operational in the middle of the COVID-19 pandemic, one of the most serious problems for businesses is inadequate cash flow, and the current pandemic is making effective cash management even more challenging. Smaller businesses that haven’t yet built up cash reserves are especially vulnerable, but even larger corporations are currently struggling in today’s tough economic environment.

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With social distancing mandated from the Centers for Disease Control, it can be difficult to get financial help for your small business when you need it. Luckily, you have several tools and strategies at your disposal to help you navigate these choppy waters. Consider the following advice to secure fast business funding when you need it.

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    Provide structure for your clients (and yourself)

    When times are uncertain and chaotic, it’s even more important to have a structure in place that will help your business, your employees, your clients and even yourself feel more grounded. Ideally, you’ll have this structure set up ahead of time, but if you’re just starting now, even some simple policies and procedures can set clear expectations for everyone and provide quick capital for small businesses.

    By putting clear and simple policies and procedures in place, your employees and customers can follow direct guidelines without having to put forth too much effort or thought. Include both external policies, such as guidelines for on-time customer payments and internal policies, such as guidelines on what employees can and cannot charge to company expense accounts. Outlining these policies on how cash is handled throughout your organization is an important step to improving and maintaining a healthy level of cash flow.

    Create a payment structure

    Taking a passive approach to billing can leave small businesses in dire straits when clients are habitually late with payments. To help minimize or even prevent these problems altogether, review your standard contract language and be sure it covers the following:

    • Be clear about payment deadlines. Put dates in writing to encourage accountability and keep you and your clients are on the same page. Using the same deadline structure for all clients makes things easier to manage internally and sets clear expectations upfront. This should make it easier for your clients to stay on time with their payments, in turn improving your business cash flow.
    • Clearly define late payment fees. Once your payment deadlines are clearly outlined, you can add in consequences for payments that fail to meet those deadlines. Make sure your late fees are also clearly defined upfront in your contract, as this will further encourage on-time payments from your customers and avoid frustrating conversations when customers are late. Make sure you’re aware of any state restrictions when crafting your late-fee policy.
    • Offer early payment discounts. Sometimes the carrot works better than the stick. Offer early payment discounts to further incentivize your clients to pay on time. That small percentage you won’t receive when customers pay early will be well worth having the cash in your pocket sooner.
    • Provide terms and conditions. Include a few lines in your contract explaining that the deadlines and fees apply to all clients equally. This language can set the expectation that your deadlines are non-negotiable, and it will further help you avoid those awkward conversations with clients who feel like they deserve special treatment or exceptions.

    [Read: Small Businesses Can Apply For PPP Loans Again Thanks to a Second Round of Funding]

    Combatting cash flow problems

    Late payments from customers are typically not the only cause of business cash flow issues. With the current pandemic, businesses are experiencing unprecedented production delays, lost resources, and excessive labor costs. But even when the pandemic has passed, other natural disasters and unplanned expenses can cause serious cash flow problems for businesses. Without a plan in place for accessing additional cash flow, these issues can greatly affect your ability to pay your employees and continue providing services to your clients.

    Consider taking out a small business loan

    One option for accessing additional cash flow is to secure fast small business loans. If your issue is temporary, a loan may be your best option for getting the needed capital to continue operating through the rough patch. If you have clear business projections for upcoming expenses and you know approximately how long your business will need financial assistance, it can be relatively straightforward to demonstrate how much of a loan you will need. If your business has a strong revenue history, this can also prove your ability to repay the loan after the crisis has passed, which can improve your chances of approval. Business loans are typically structured as:

    • Line of credit loans: These loans provide a reusable line of credit for a predetermined amount. Businesses can borrow some or all of the line of credit, make payments towards the balance, pay it completely off, then borrow against it again.
    • Installment loans: These business loans are typically associated with a major purchase or item. For example, if a business needs to purchase a new piece of equipment or a vehicle, a bank would finance the purchase under an installment contract with regular monthly payments until the balance and interest were repaid.
    • Merchant Cash Advances: These loans are offered as cash flow on the promise of future sales. These loans work best for businesses with consistent, documented income streams. If, for example, a business earned $100,000 in online sales every month, it could negotiate a cash advance from a lender in exchange for a percentage of the upcoming sales each month for the next few years until the advance was repaid.

    Use a business credit card

    Making strategic use of a small business credit card can help you manage periods of slow cash flow. Business credit cards offer a way to pay expenses that alleviates financial pressure, and they can also provide extra capital through lucrative rewards programs.

    How to use business credit cards

    Rather than writing checks from your commercial account to pay for everyday office expenses when you’re short of capital, consider putting them on your business card. It can take as little as two days for a check to clear, but the monthly billing cycle for credit cards works to your advantage here. Expenses put on your business credit card won’t start accruing interest until the close of your billing cycle, allowing you to float some of those expenses for up to 30 days interest-free. In fact, some credit card issuers have business-friendly policies that allow deferred payments for even longer.

    Carefully review your card policies, payment deadlines, and rewards terms, and only charge expenses that you can safely repay within the next billing cycle. To maximize your rewards benefits and improve your cash flow, restrict your use of business credit cards to only expenses that earn the most rewards points.

    Be careful when you charge now and pay later

    Making credit card purchases during periods of slow cash flow can provide you with some financial breathing room. At the same time, it’s important to use this strategy sensibly. Always pay your credit card bill on time if possible. Making late payments and otherwise overextending a line of credit can hurt your business’s credit rating and cause you to make your cash flow problem worse.

    Although interest on a business credit card is tax-deductible along with late charges and other types of fees, you won’t be able to write it off until you actually file taxes for that year. You’ll also want to avoid racking up excessive charges at the very end of a billing period, or you may defeat the purpose of the “charge now and pay later” strategy.

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    Types of business cards

    You could use your personal credit card for your small business, but a dedicated business card can improve your cash flow by helping you track and itemize your business expenses. Furthermore, business credit cards often include rewards that are targeted to small business owners, helping you to save money on normal business expenses. To help your cash flow stretch in a tight spot, here are some business cards that might benefit your company:

    • Travel cards: These cards allow you to earn points for travel rewards, such as airfare, hotels and ground transportation. Some cards may also let you transfer points to airline or hotel loyalty programs. For businesses where travel is a necessity, this type of card can help you defray costs by charging everyday business expenses.
    • Cash back/rewards cards: Rewards cards allow you to earn cash back on select business expenses. Instead of travel vouchers or gift cards, these rewards programs send you cold hard cash as an incentive for using your business card each month. These cards typically offer maximum rewards points for select types of charges, such as restaurants or hotel stays, so choose a card that offers maximum rewards for spending that is relevant to your business.
    • E-commerce cards: These business credit cards are especially beneficial for companies that do a lot of shopping online. While some cards earn rewards points for shopping in brick-and-mortar locations as well, e-commerce cards offer the highest rewards when shopping online.

    [Read: Best Business Credit Cards of 2020]


    Get the most out of your points and rewards

    To maximize your cash flow, you’ll want to earn the maximum benefit from having a business rewards card. Educate yourself on how points are earned, any point caps that may apply, and when points expire. Once you’ve earned rewards points, they won’t continue to accumulate indefinitely. Using the guidelines for your specific cards, take steps that will earn you the maximum number of points each month without adding unnecessary spending, but also be sure you use all of your rewards before they expire. To get the most out of your rewards card, you should also:

    • Use your card for routine office supplies: If you’re going to spend this money anyway, it’s best to earn some cash back on these expenses.
    • Choose services based on rewards levels: Book your business hotel stays at a chain that offers the best rewards points. Take clients out to dinner at restaurants that offer rewards points for your card. If you are partial to specific chains or vendors, factor that into your decision when first selecting your business card.
    • Pay attention to rewards bonus offerings: Many cards offer a rewards bonus at select locations during specific quarters of the year. For example, your card might offer 3% additional cash back for online purchases during Q4. These bonuses are typically announced well in advance, so take note of these bonus offerings and plan your purchases during peak rewards times whenever possible.

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    Julia Taylor

    Contributing Writer

    Julia Taylor is a freelance writer based in Nashville, TN. She takes complex business, financial, and technical topics and makes them easy to understand. You can find her work published on a variety of business blogs, including Paychex, Kapitus, Sanford Brown, Fortis Educational Institutes, American University of Antigua and

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    • Courtney Mihocik
      Courtney Mihocik
      Loans Editor

      Courtney Mihocik is an editor at The Simple Dollar who specializes in personal loans, student loans, auto loans, and debt consolidation loans. She is a former writer and contributing editor to,, and elsewhere.