Let’s face it; there are times in every small business owner’s life when cash flow is compromised. Maybe it’s because sales are down, clients are slow to pay and expenses are racking up, or you’re stockpiling inventory for your busy season.

But if you lack cash reserves, what are your options? As in all aspects of business, planning is key. Here are some financial strategies you can explore now to ensure your small business survives its next unexpected cash flow crisis:
1)     Work on Building Good Business Credit
Even if you have good personal credit, if you’re serious about business ownership it’s important that you take steps to establish business credit. Why?
Your business credit is a valuable asset that can be used to finance your business based on its own creditworthiness, as opposed to that of the business owner(s). It also gives you the freedom to invest in growth without depleting any cash you have in the bank or to explore financing options to help tide you over during seasonal lulls.
In his blog, “The Importance of Building Business Credit,” credit expert and SBA guest blogger, Marco Carbajo, cites two additional benefits of building business credit: 1) a creditworthy business is more attractive to potential buyers or investors, and 2) good business credit protects the business owner from having to co-mingle personal credit, debts, and assets.
Establishing business credit takes time and some strategic tactics. Check out Marco’s tips for steps you can take to build your business credit.
2)     Put Away the Personal Credit Card, get a Business Card
Credit cards are a major source of financing for small businesses, especially during a credit crunch. However, less than half of these cards are business credit cards. If you intend to establish business credit and achieve true separation of your business and personal banking (a must if you intend to operate as an LLC), then a business credit card is the way to go.
Not only do business credit cards provide an instant line of credit without the need for lengthy loan approvals or the need to put up any collateral, the abundance of 0% APR introductory offers and rewards programs can be a big aid to cash flow, especially if you need to make unexpected investments in stock or business assets.
Used responsibly, a business credit card gives you cash when you need it and, if tied to the major business credit reporting agencies, can help boost your business credit score.
3)     Explore a Line of Credit
If your business experiences operating cycles, such as on- and off-seasons, and you find you need an injection of cash to cover seasonal expenses, a line of credit can provide a flexible and low-cost alternative to traditional bank loans. Unlike a loan, which you apply for when you need it and use as soon as it’s approved, a line of credit is set-up before you need it and monthly payments don’t kick in until you dip into the cash. The approval process is also less complex than a traditional loan.
Securing a line of credit before you actually need it offers a useful buffer, but it’s not the only option and should be approached with caution. It may be tempting to dip into it just because it’s there. Plus, if you don’t make repayments on time, experience cash flow changes, or your FICO score drops, then your bank may turn that line of credit into a pure loan with the associated fees and interest rates.
Other options to explore include negotiating discounts and flexible payment terms from vendors or easing cash flow issues with low-fee invoice clearing services such as those offered by Fundbox. You can also learn more about small business financing and financial health by visiting www.thefundwell.com.
Read more about getting a business line of credit from About.com.
Summary
Cash flow management is one of the top reasons why small businesses fail. Of course, the problem with cash flow is that it’s often hard to predict. There’s no doubt that good financial practices such as maintaining a cash flow statement can help provide a view of income and outgoings; however it only takes one or two unexpectedly late payments from clients to put your entire business in jeopardy.
Stay one step ahead of cash flow problems by maintaining at least 3-6 months in cash reserves to cover any unknown or variable expenses that may arise, and take the time to develop a solid  fiscal back-up plan – hopefully the above strategies can help!
Tomer Michaeli is a co-Founder of Fundbox, a technology company that is fixing the small business economy. He is an expert in SMB and B2B services, with a deep technology focus. He served as a technology expert and principal at Carmel Ventures. Prior to Carmel, he served as an R&D specialist in various organizations, before being promoted to manage an outsourcing and technical cooperation department. Tomer holds B.Sc. in exact sciences, an M.Eng Cum Laude from the Technion, Israel’s Institute of Technology, and an MBA from INSEAD.