The importance of cash flow: Running a business isn’t always about making a profit. The main concern for any business first and foremost is generating cash.
So, you own your own business and things are going pretty well. The economy is trending upward and sales are starting to normalize, even gaining some momentum after a long and painful economic recovery. You are even considering expanding to a new location, increasing inventory or adding new bays. But what if you don’t have the cash to expand? Can you get a loan?
No problem, you think to yourself. So you visit your local banker. After all, you make a profit every month, so he is sure to loan you that extra $200,000 that you need, isn’t he?
Maybe the banker will loan you the money you need. Maybe he won’t. Just making a profit every month does not guarantee that he will write you a check!