In the world of business, there are different types of liquid assets: cash, accounts receivable, and other forms of capital that can be easily sold. Liquidity refers to a balance sheet’s ability to pay off quick debts without needing to sell off assets. In essence, it’s about having wealth is easily accessed forms that can be used in a pinch when needed. Let’s have a look at a few ways to improve liquidity in a business.
1. Increase Dealings in Cash
Cash is the easiest way for a company to maintain liquidity because it doesn’t require any form of financing in order to access it. Any business will need to get cash in order to continue operating. The most expensive and inefficient way to get more cash is through credit card transactions or loan repayments. This can be expensive because financing usually comes with interest on top of the original loan sum. If you wish to increase the liquidity of your business, the best thing that you can do is increase your dealings in cash. Encourage your customers to pay in cash and avoid investing too much in hard assets that can’t be sold immediately when the need arises.
2. Eliminate Unnecessary Inventory
No business can function without having some form of inventory. However, if your company is anything like most small businesses, the inventory will be the least liquid asset that you own. To improve liquidity, you can choose to cut down on your investment in unnecessary inventory. This will effectively reduce the liquidity of your company by reducing its overall value. It’s a tradeoff that’s worth making because inventory takes up valuable storage space and it needs constant maintenance anyway.
3. Move Out of Stocks and Bonds
Owning stocks and bonds is one way to build long-term wealth that doesn’t require any immediate transactions with cash or other liquid assets. However, it can be very risky because it locks your wealth away for a long period of time. Stocks are used for making investments that will hopefully provide high returns in the future. Usually, this is done without any guarantees or assurances that you will receive any return on investment at all.
Owning bonds is not much different. It involves borrowing money from other companies and governments who are willing to loan out their cash with interest rates attached. This isn’t a good way to maintain liquidity because it requires so many risky investments to be made without any assurance of return or profit.
Global Capital Partners Fund can help you with bridge loans and other financing options. Apart from bridge loans, we are also offering different financing solutions, such as commercial financing for land, acquisition and development loans, structured joint venture financing, commercial real estate funding, bridge loans, hard money loans, joint venture financing, and hard money loans in New York. You can get in touch today to learn more.