Cash is King

“How little you know about the age you live in if you think that honey is sweeter than cash in hand.”

Ovid (43 BC – 17 AD)

What was true 2,000 years ago is even more so today. It happens on a regular basis – a solid business idea withers away because the founder(s) didn’t have enough capital/cash to build that idea into a company. Cash will always be king because of the leeway it provides for your business to take risks, make mistakes, or simply make payroll.

Cash comes in many forms: money in the bank, accounts receivables, loans/lines of credits, angel/venture capital investments, etc. While many startups or small businesses should fear certain types of debt (such as credit card debt), they should pursue the good debt (lines of credit, AR financing). One of the reasons Alexander Hamilton was always my favorite Founding Father (before Chernow or Miranda) is because he saw the value of debt. Cash above collected accounts is like having your cake and eating it to.

All my startup endeavors looked for some form of debt to help augment business cash flow. This was typically in the form of a line of credit, which allowed for better management of the debt (real and accounting), while still giving us the extra cash necessary to make investments in the business (purchasing new equipment/services, expanding an offering, covering a cash shortfall, etc.). While there was always a risk, if we were smart about the use of debt, the risk was minimal. The risk of not doing anything or taking on the wrong debt was much more significant.

The reality of securing a line of credit isn’t pretty. Financial folks are not in the business of lending money just because they like you, though that helps. They want to know they’ll get the money back, with interest. So, if your P&L statement and balance sheet don’t tell an exciting story, then you won’t get far. If you’re less than a year old, that’s a strike against you. If your account receivables are too high, another check in the “NO” column. Now, if you have collateral (like a home), it’s a much different story. But do you have the confidence to put your home on the line?

The last thing you want to do is get buried under bad debt. Credit cards are the most enticing form of cash, but they’re also the worst if you don’t plan to pay them off each month. In the 15+ years I’ve owed various businesses, I can count on two hands the times the company or personal credit cards weren’t paid in full each statement cycle. Credit cards will eat through cash and you won’t even know it.

Outside of the actual business offerings and delivery of those offerings, what I obsessed over most was the cash I had on hand and in accounts receivables. Not only did this tell me how well the business was doing, but it allowed me to think of the next direction in which to take the business. If I had quality debt available, that gave me the confidence to be more aggressive and take calculated chances. They didn’t always pay off as expected, but with the cash cushion, we’d be able to rebound.

Sean O’Rourke
About Sean O’Rourke 6 Articles
Sean O’Rourke is a Cyber Liability Insurance (CLI) consultant for Combs & Company, a full service insurance brokerage firm headquartered in NYC. Sean works with small- and mid-sized businesses to mitigate the myriad of risks posed to their technology and data. Sean has worked in the technology arena for 20 years, so he has a unique approach when discussing the value of CLI to businesses. Sean can be reached at or 646.736.3737.

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