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Raising cash quickly during a cash flow crisis

If your business experiences a downturn or financial crisis, you may need to raise money fast. Here are some ways you could help increase cash flow.

3 minute read

Here are the three main categories of business assets you could convert to cash.

1. Current assets 

If you’re selling physical items and don’t need them replaced to operate, you could use the money to pay for other immediate costs. This can be known as increasing the liquidity of your business, or liquidising assets. 

Common examples of current assets to convert to cash are:

• accounts receivable to collect
• existing inventory
• raw materials
• manufacturing and packaging supplies
• short-term investments that mature in under 12 months
• any funds in offshore accounts you can bring back.

If in the past you’ve held excess product and raw materials to take advantage of bulk discounts or efficiencies, now could be a good time to hold fewer items in reserve. If that works for your business, you could review your processes to only order ‘just-in-time’ to lower the volume in stock.

2. Fixed or long-term assets 

These are usually the more expensive, long-term items you’ve purchased to run your business. Think about taking the opportunity to sell fixed assets you no longer need.

Common examples of fixed assets to convert to cash are:

• excess technology
• office equipment and furniture
• machinery and plant
• vehicles
• long-term investments.

To free up capital, you could consider selling assets you still need, and then leasing them back – like property, land, equipment, or vehicles you want to continue using.

Leasing an asset needs to be considered carefully. You’ll get immediate cash to keep you afloat, but it might cost more than owning it in the long run.

You could also review parts of your business that could be sold without disrupting your core business –  like different locations, branches, or offices that aren’t part of your main business operation.

This could also be a good time to get rid of under-performing parts of the business. If you have expanded in the past, you could retrench back to core products or markets.

 3. Intangible assets 

These are valuable assets to your business, that could be sold to another business. These assets can be harder to value and sell. They include intellectual property (IP), goodwill, brand, and your business ‘know-how’.

They are worth something to your business but are much harder to unbolt and sell. Also, possible buyers are usually in the same industry and situation as you. They too could be having a cash flow shortage.

Common examples of intangible assets are:

• patents
• trademarks
• designs
• informal agreements
• customer contracts.

Keep in mind your IP is often inseparable from the core value of your business, so seek external advice before you sell these assets to another business.

Seek advice

If you do liquidise some of your business assets to keep the business intact, remember it’s a balancing act. You’ll need cash to survive while ensuring you’re not restricting your business permanently with reduced capacity and capability. The value of an asset will also probably be below market value.

Consider all your options before you sell your business assets as there are different risks and benefits associated with each approach, so carefully assess which works best for your situation.

Seek legal, financial, and business advice before making decisions that impact your long-term future.

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This content is for general information purposes only and does not constitute, and is not intended as, personalised financial, legal or tax advice. BNZ recommends that you seek advice specific to your personal financial, legal or tax situation from a qualified adviser. Neither BNZ nor any person involved in the content accepts any liability for any direct or indirect loss or damage arising out of the use of, or reliance on, all or any part of the content.