Lenders price loans based on risk, and having more liquidity and a more predictable cash flow signals to your lender that you’re not likely to miss payments. A lender will then often give you a better interest rate that benefits you during your repayment.

Increasing liquidity doesn’t mean just having cash in the bank, but also having predictable incoming cash and the possibility of quickly converting assets to cash, should the need arise.

There are a few things you can proactively do to increase the liquidity and receive a better loan rate. Here’s what you need to know.

Speed up Cash Flow

To speed up cash flow, you can first consider switching to payment methods and handlers that process transactions faster than traditional banks.

Some businesses benefit greatly from taking payments through crypto due to the fact that it allows for much faster liquidation than traditional methods. Rather than waiting several days for payments to clear, payments with cryptocurrencies can be near instant.

While there are clearly some risks that come with crypto – mainly the inherent volatility even in stable coins – there’s also real value in being able to liquidate assets immediately.

Offering customers and clients the option of paying with cryptocurrency is one easy way of quickly moving cash flow along faster. Many online sites these days, including casinos, accept crypto. Take, for instance, the best BNB casino sites that let players make instant and free deposits and withdrawals, all the while qualifying for welcome bonuses. Both customers and the business can benefit from incorporating crypto payments.

Another way of speeding up cash flow is offering customers an incentive, like a discount, for early payments.

Invoices should also be sent out as early as possible. If you haven’t already, automate the invoice process rather than having all of them manually sent out at the end of the month.

Strengthen Key Financial Ratios

Your financial situation overall should be what matters, but lenders will often simplify by looking at a few key financial ratios and indicators. By focusing on improving these, you’ll also increase your chances of getting a better rate for a loan.

Debt Service Coverage Ratio (DSCR) is one such ratio. It’s calculated by dividing the net operating income by debt service, including principal and interest. By focusing on making these numbers look pretty, you’ll become a green flag to any potential lender.
Another indicator lenders look for is the loan-to-value ratio, known as the LTV. By either increasing equity or reducing the requested loan amount, this ratio will look more positive and less risky to a lender.

Cleaning up noise on your balance sheet – removing off-balance items, resolving disputed payables, correcting any accounting errors – will also help ensure there’s no confusion and that the lender can clearly see the current situation as it is. Tidy financials make it look like you have the finances together, and lenders will be more likely to believe you’ll actually make your payments every time.

Reduce and Restructure Debts

Restructuring or refinancing high-cost and short-term debt can help prepare you for getting a better loan rate next time. Consolidating multiple smaller loans can also clean up finances and often lower prices compared to fragmented loans.

Additionally, by structuring loans in such a way that they match cash flow – including setting up amortization schedules that align with seasonal ups and downs – you can improve your position to pay back on time and make your payment ability look better.

Prepare Documents and Financial Forecasts

While improving cash flow is one of the most important things to do to improve your loan rate, it’s also important to ensure you’re ready for questions and have all the documents prepared. You need to be able to show clean and current financials, bank statements, and any other reports that may be required.

You can also build and show lenders a realistic short-term financial forecast that demonstrates how you'll budget to ensure you more than cover the payments. Since forecast accuracy signals good financial control, you'll want to be as realistic, detailed, and correct as possible.

Add Collateral or Guarantees

Since what a lender is really concerned about is risk, adding collateral or preparing and pointing to a cash buffer can improve your chances of being offered a good rate.

Be Ready to Negotiate

By shopping around rather than focusing on a single lender, you can strengthen your negotiation stance and ensure you're getting the best deal that you can for the type of loan you're looking to take. By documenting any competing offers, you increase leverage, ultimately leading to a better rate.

In the negotiation process, it’s also good to understand the underlying components making up the price of the loan: the base rate, the margin, and the fees. You may be able to lower these by improving liquidity or offering collateral, and by asking about how components might shift, you can negotiate fees and ensure you really get the best deal by all standards.