Will a Loan Help?

If you are in a cash crunch, will a loan help, or just make things worse? Or for that matter a capital infusion from a new partner? Or cash from your personal bank account?

The answer all depends on your ability to manage your cash and understand your cash flow. Depending on your situation, a loan could dig a deeper hole, a new partner could end up in a lawsuit, or could be throwing your good money into a bad situation.

Here are three basic scenarios:

1. You have complete understanding and control and know that the money will pay off through profitable business activities and healthy growth. Bring in more cash.

2. You don’t have a complete understanding, but you 100% know that for a particular project, order, or capital investment there will be a payoff. Bring in more cash just for that project or order.

3. You just don’t know what will happen, but you need the cash to survive. In this case, do everything you can to avoid bringing cash in until you know what will happen. Usually, it will just make things worse.

Any thoughts? Would you blindly bring in more cash on a “gut” feeling?

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