When cash is king, the ability to generate liquidity is crucial, but in today’s pandemic-rocked economy, this can present a challenge to small business owners. While it’s true that the CARES Act allows for the withdrawal of up to $100K from retirement accounts, business owners are cautioned to be wary of short-term fixes that can have lasting and serious long-term consequences.

The federal government has also provided new avenues of relief including the Paycheck Protection Program (PPP) and the Economic Injury Disaster Loan Program (EIDL). But small business owners cannot rely solely upon these resources to recover and thrive in our continually evolving financial landscape. The following are five strategies that business owners can leverage as alternatives to generate and manage cash flow:

State and Local Grants

Small business owners can vastly expand their potential access to financial resources by looking beyond the federal government to their state and local municipalities. Each state and county has its own provisions for disaster relief loans and grants, as well as ongoing opportunities to apply for funding. A quick Google search can take you to your state’s or county’s commerce website, or the portal they’ve set up for grant and loan applications.

In addition to the resources that have been allocated to specifically address COVID-19 impacted small businesses, there may also be funding available for a wide range of other qualifying factors that can include:

• Industry specific businesses, such organizations involved in transportation or community development
• Minority owned businesses
• Businesses owned by women
• Businesses owned by or serving veterans
• Startups

Traditional Financing

The government–federal, state, or local–is not the only lender small business owners can turn to for recourse. While interest rates on small business loans secured through traditional financing via small regional to larger national banks will vary based on the lender, the terms of the loan, and other factors, the average annual interest rate is currently between 2.5 and 5.5%. These rates may even be able to be reduced for business owners who add a loan or new line of credit to an existing account in good standing.

With these historically lower rates, financing from traditional sources may be a more viable option for small business owners now than in the past. Alternative or online lenders may also be worth investigating as their criteria for loan approval may be more lenient, however, their interest rates may be steeper to offset the risk.

Leverage Existing Relationships

Your relationships with your existing creditors, vendors, and even customers may be an untapped source of liquidity for small business owners, lessening the impact of accounts payable and providing a quick cash infusion to organizations in need of relief. Consider first any payments you owe, and ask to renegotiate the terms. Suppliers and lenders may be willing to accept smaller payments over a longer period of time, and landlords may be willing to defer rent.

Small businesses can also look to their customers as a source of liquidity. Requesting an advance payment from individual clients may provide some relief, but business owners can also set themselves up for better cash flow management overall by instituting incentives for clients to pay in advance or pay more quickly.

Create a Team

One of the best ways to navigate any financial or business growth question is to leverage the counsel of a team of trusted advisors. Every small business owner should have a core group of professionals who are not only trustworthy, but who are also able to communicate with each other to ensure that everyone is on the same page in protecting and moving your business forward.

At the minimum, this team should include a highly skilled small business CPA and attorney, as well as an established relationship with a reputable bank to whom you can turn with questions and requests for guidance in times of need.

Create a Plan

The best way to generate liquidity, of course, is to not have to scramble to do so in a time of crisis, but to plan for it. Every business owner should have a source of liquidity to which they contribute on a monthly basis, and from which they are able to withdraw needed funds in challenging times.

Creating a plan for an established and dependable source of liquidity can provide small business owners not only with needed funds, but with the peace of mind that their business has a buffer against crises. What source of liquidity is best for you and how to structure your contributions will vary based on your particular needs and circumstances, but relying on the guidance of your small business CPA and other trusted advisors will help you establish a plan that will serve you and your business well into the future.

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