Small-business cash flow tips for restaurants

Lingering economic sluggishness and the associated credit crunch continues to affect independent restaurants. Often stressful even in good times, maintaining consistent cash flow can now require real resourcefulness.

Every small business should divert a substantial stream of revenue into a reserve stash of cash on hand, though that can become a distant dream if costs and loan payments mount. A revolving line of credit is a must for restaurants. If banks don’t help, consider credit unions, which are prospering in the wake of the commercial banking industry’s role in the crises of the past several years.

Trim the fat wherever possible, cutting down on overhead and taking a pass on anything involving high-risk cash outlays, at least in the short term. Take an organized, disciplined approach to collecting payments – aka upfront, almost always. Setting a minimum transaction amount for invoices is another common tool in this process.
Most credit card companies provide merchant account financing, another useful service for small businesses. Your business probably qualifies for merchant financing if you accept credit cards as a method of payment, conduct a minimum dollar amount of credit card transactions per month and have no red-flag issues like bankruptcies or missing rent or bill payments over the past year or so.

Also known as a business cash advance, this service typically provides anywhere from a few thousand to several hundred thousand dollars, with repayment taken from future credit card transactions. This arrangement is not a loan, though it should be approached with similar attentiveness given the variety of fees and conditions out there.

Many financial experts are urging both individuals and small businesses to take advantage of increasingly attractive credit card terms, inspired in large part by new financial reform laws passed by Congress this year, which regulate checking account fees and the like. You should consider what small-business credit card features are most useful to your business, whether cash-back, rewards-based or others.

The old-fashioned tool of bartering came back in a big way during the recession, helping thousands of restaurants and other small businesses survive. It’s a practical way to limit expenditures on a range of goods and services, and can also help build a grassroots customer base, as the Wall Street Journal notes.

Short-term business loans, often arranged via your local small-business bureau, are another solution, but they remain harder to snag than they should be. If you find one, read the fine print, of course, because rates and fees vary.

SBA also offers a range of programs like CAPLines Loans, which helps small businesses meet short-term working-capital needs with government-backed loans.

Even though restaurateurs may feel anxious about cash flow in these uncertain times, it might not necessarily be a bad time to hunt for new investment. Are you comfortable giving up a bit of independence to gain cash that can be put to immediate use?