Short-Term Financing: How to Get Your Business Through a Cashflow Crunch

By Connor Wilson on November 30, 2018

This article was written by our friends at Nav, a free service that gives business owners access to their business and personal credit scores, and tools that match them to the best financing.

Sometimes you need financing just to survive a cash crunch. You’re not launching a new product or expanding to a second location. You just need to get through the next month.

Here are a few fast financing options to tide you over until your cash situation is stable again.

Business line of credit

Also known as a revolving line of credit, a business line of credit is one of the most popular forms of financing for business owners, and for good reason. It’s flexible and fast.

When you’re approved for a business line of credit, the lender will determine a withdrawal limit, and you’ll be able to draw up to that limit. Your business can draw cash from the line of credit as you need it, and pay back the amount withdrawn. This is what separates a business line of credit from a business loan; a line of credit only requires you pay back the amount your business uses, when you use it.

For this reason, even companies without immediate cash flow issues sometimes keep an open business line of credit as a source of emergency funding.

When you apply for a business line of credit, there are a few factors lenders will consider, including time in business, cash flow, and your business credit score.

Business lines of credit can be either secured or unsecured. A secured line of credit requires the borrower to put up some sort of collateral, such as property, company vehicles, equipment, or inventory, as a security deposit. Unsecured lines of credit don’t require collateral, but are usually more expensive for the borrower because of the higher risk taken on by the lender without collateral.

Newer businesses or those with poor business credit may only qualify for a secured line of credit. Older, more established businesses may be able to be approved for unsecured lines of credit at reasonable interest rates, otherwise most businesses prefer secured lines of credit for the generally lower rates they come with.

A loan is usually better for a single project or major purchase, while a business line of credit is perfect for businesses that regularly experience lulls in cash flow due to seasonality or clients regularly paying late.

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Business credit card

While a business line of credit or business loan may take several weeks to be approved, a business credit card offers instant access to funds and a relatively short turnaround for approval.

The main benefit of using a business credit card: just spend it when you need it, no need to wait for a bank to clear the funds. They’re also easier to get than a loan.

Perks and rewards are another draw to using business credit cards. If chosen well and used wisely, a business credit card can get you travel points, cash back, insurance coverage, and lots more. The obvious drawback to using a business credit card is the high interest rate. This may make it a less-than-desirable option for big purchases.

Invoice financing

If slow payments from your clients are causing your lull in cash flow, invoice financing could be the answer to keeping things running smoothly for your business.

Invoice financing is a way of using your accounts receivable as collateral for receiving a portion (around 80%) of the outstanding amount from the lender. This differs from invoice factoring which is the sale of the outstanding accounts to a factoring service. Both invoice financing and invoice factoring are ways to turn your outstanding accounts receivable into cash you can use for your business needs.

Both are viable options for a business in a crunch with outstanding payments from customers, but invoice financing allows you to retain control of your accounts receivable. Invoice financing is also typically less expensive than invoice factoring, with fees coming in around 2-4% of the invoice amount, compared to 3-5% fees for invoice factoring services.


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This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult his or her own attorney, business advisor, or tax advisor with respect to matters referenced in this post. Bench assumes no liability for actions taken in reliance upon the information contained herein.

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