It’s no secret that cash flow is the life blood of a small business, but once you have sufficient cash reserves to fund your immediate short and medium-term operational requirements, it’s then a sensible move to start looking at ways to make your cash work harder.


Here, we take a look at how you can invest this money into your business, as well as other ways to source capital to fund your future ventures.

General Financial Advice for Long-Term Growth

If you feel that you don’t have the finances to grow, another way to facilitate this is by introducing extra working capital in the form of a business loan. But, with this it’s important to remember that by taking out a loan you of course then have the financial responsibility to pay this back. Part of this is also about how much risk you might be willing to take.

Alternatively, if you are running a successful business and have extra cash or profits that you could simply reinvest in your operations over the long-term.

Reinvesting Profits

On the subject of your profits, if you’re a small business owner who prefers to keep their excess cash in a deposit account, it’s fair to say that this isn’t always the best way to grow your money – particularly with low interest rates.

Instead, it’s prudent to look at investing profits from your business with a view to generating an income in as wide a variety of opportunities as you can.

The Best of Both Worlds

If however you feel a deposit account is the financial safety net you prefer, there are still ways you have this and help your company grow.

What you need to do is draw up a business plan to ensure you have sufficient liquidity to fund your business’ growth, keep your deposit account and cover any potential financial issues over the next five years.

Then, you should look to work out your risk tolerance, as this will dictate what type of investment opportunities you can potentially look at with your business.

Which Investment Strategies are Right for my Business?

If you’re not sure where to head with your investments though, then you might want to consider some of these strategies for small businesses:

  • Commercial property investment – instead of renting premises, buy instead.
  • Penny stocks – Penny stocks are a lower cost investment opportunity for new investors, however they can be high risk.
  • Mutual funds – Mutual funds are a medium risk investment managed by a fund manager, so your investment should be relatively safe in the long-term.
  • Hedge funds – A higher risk investment strategy, but there is greater potential for better returns.

If you still feel that you lack the experience required to maximise investment income, it pays to consult with a professional for guidance. A specialist firm such as Tilney for example can offer you advice on the most cost effective way to make your business profits work harder. There’s no shame in seeking outside support if you need it.

Remember, smart investors maintain a diversified investment portfolio, so split your cash between different asset classes, stocks and bonds, and always have sufficient cash reserves in place. This way you can really benefit your small business in the long-term.

Image courtesy of iStock

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