If you have ever run a business or invested for profit you may have come across the term cash flow and possibly been in the position where cash flow was a problem. Cash flow is an important part of the wealth building structure, because as they say, money greases the wheels and makes everything smoother.
When investing or building a business, there are always times when you have invested a large chunk of your money in temporarily illiquid places. This might be stock that you were forced to purchase in such bulk, that it took most of your available cash reserves, but you did it because of the deep discount you may have received for the inventory. Your level of sales being what they are, you will move this stock, but it will take a few years. This is a typical scenario where a business can have a cash flow crisis.
The daily functioning of a business requires money. Everything from the rent and wages and even your daily lunch, it requires cash to keep the doors open. If you have not secured a line of credit to get you out of that cash flow squeeze, it will be more difficult to get a bank to agree to a line of credit if you have converted your cash into stock, as most business lenders do not consider stock as feasible collateral, so a line of credit before you make a decision that may give you a cash flow squeeze is highly advise-able.
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