March 25, 2021
Average Read Time: 4 minutes
IBM. KIND Snacks. Home Depot. Very different businesses that had the same problem at one time or another in their histories: cash flow issues.
And while cash flow problems can plague the largest businesses, they are especially common among small and growing ones. According to the SBA, some 50% of small businesses close in five years or less, cash flow issues cited as a primary reason.
A small business can, however, solve cash flow problems in a way that doesn’t burden the company with additional debt or high interest rates and fees. It’s called same day funding, a faster and easier option to improve cash flow that allows businesses to take advantage of money that’s already theirs.
Cash flow issues are ubiquitous in business. A U.S. Bank study says that 82% of businesses that fail cited cash flow problems as a factor. Too much initial spending, overestimating growth, slow collection of accounts receivable, no monitoring of cash flow: those are only a few of the reasons companies run short of money in the bank.
Whatever the cause, cash flow issues simply mean that businesses are spending more money than they’re making in a given period of time. If that period of time continues for too long, a company won’t survive.
Home Depot and KIND Snacks solved their cash flow problems and are thriving. (The jury is still out on IBM, which recently announced that it is splitting into two entities to improve financial performance.) While large businesses have multiple tools and options to improve cash flow, small businesses don’t have as many places to turn. Common ways for small businesses to generate cash quickly include lines of credit, invoice factoring, merchant cash advances, unsecured business loans, and credit cards. All come with their advantages and disadvantages, but in general, they include fees, penalties, interest rates, and/or repayment terms that can be onerous.
With those stop gaps, it’s also easy to get caught in a cycle of overspending or debt that’s hard to break. Such cash-generating mechanisms for businesses can help in the short-term, but obscure long-term problems that a business needs to deal with to correct the balance on income and outgo once and for all.
Which brings us to another, more attractive option: faster access to money that a business actually has earned via same day funding of their payment card transactions.
Here’s the scenario: the rent for your store is due, but cash in the bank is low. However, you are running a big sale, customers are buying, receipts are way up and this successful day means you also need to restock. Typically, credit card funds are deposited in a business’s bank account in two or more days. “Same day” usually means within the 12 to 24 hour period – not during the same workday and not on weekends.
True same day funding means you receive your money within an hour each time you submit a batch of card transactions.* Funds go to the debit card account of your choice and are available immediately to spend, even on weekends. You pay your rent (or employees, or vendors) and everyone is happy.
Unlike loans, lines of credit, cash advances, and credit cards, same day funding doesn’t put a business at risk of too much debt or overspending. It also doesn’t come with the high fees associated with other funding methods. It simply smooths the ebb and flow of money in and money out – money that’s yours in the first place. Same day funding helps small and growing businesses build as solid a financial foundation as large businesses with more resources at their disposal. It’s truly a game changer.
Want to see the power of Same Day Funding in action? Check out this video to learn more!
*MerchantE Same Day Funding requires batches to be submitted by 9:00pm Eastern Time to receive immediate funding, and applies 7 days per week. Funds are typically deposited within minutes, even less than an hour.
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