Before applying for credit: seven measures to unlock liquidity directly from your balance sheet, often faster and always cheaper.
External financing should not be the first remedy for a liquidity crunch — it should be the final piece. Every euro unlocked from your operating cycle carries no interest burden and strengthens your credit profile if you do seek debt later.
Seven measures with immediate impact
- Invoice faster: on milestone completion rather than monthly in arrears
- Implement milestone billing and upfront deposits for longer projects
- Establish a rigorous credit control process with defined escalations and clear ownership
- Negotiate extended supplier payment terms rather than paying overdue
- Liquidate obsolete inventory, even at a loss — it is dead capital
- Reduce work in progress (WIP) by delivering smaller, more frequent increments
- Explore whether unencumbered equipment can be refinanced (sale and leaseback)
Calculate the financial impact
Shortening debtor days by twenty days on a turnover of five million euros generates over two hundred and fifty thousand euros in additional liquidity — permanently, without interest, and free of collateral pledges. For most SMEs, that exceeds any overdraft facility they could secure.
Only then seek financing
If a structural funding gap remains after this, it becomes a genuine growth financing case rather than a symptomatic fix. Furthermore, lenders value the fact that you streamlined operations first: it reduces their credit risk and consequently lowers your borrowing margin.