How to Get Liquid Capital From Assets, Loans, and Income

Liquid capital refers to cash or assets that can be quickly converted into cash with minimal loss of value. This includes readily available funds like bank balances and certain short-term investments. Having liquid capital is important for financial adaptability, enabling individuals and businesses to address unexpected expenses or capitalize on opportunities. It represents the money on hand that can be used for various needs without significant delays or complications.

Accessing Existing Personal Resources

Converting personal assets into liquid capital involves distinct processes depending on the asset type. Funds held in savings accounts can be accessed through various methods, including withdrawals at an automated teller machine (ATM) using a linked debit card. Funds can also be withdrawn by visiting a local bank branch and completing a withdrawal slip with identification. Alternatively, transferring funds from a savings account to a checking account through online banking or a mobile app provides another avenue for access.

Investment accounts, such as those holding stocks, bonds, or mutual funds, can be liquidated by selling the securities through a brokerage firm. The proceeds from these sales are then transferred to a linked bank account, which can take a few business days to settle before the funds become available for withdrawal. Certificates of Deposit (CDs) are considered liquid assets, but cashing them out before maturity incurs an early withdrawal penalty, which is a deduction from the principal or interest earned.

Personal property, including vehicles, collectibles, or household items, can be sold through various channels to generate cash. Online marketplaces, consignment shops, or private sales directly to interested buyers are common methods. For larger assets like a secondary property or real estate, the process involves determining the fair market value, finding a buyer, and then proceeding through a closing process that finalizes the sale and transfers funds. Cash sales of real estate can expedite the closing timeline significantly compared to traditional financed sales.

Securing External Debt

Obtaining liquid capital can also involve securing external debt, with various options available depending on individual needs and creditworthiness. Personal loans, whether unsecured or secured, are offered by banks, credit unions, and online lenders. To apply, lenders require identification documents like a driver’s license, along with proof of address and income verification through pay stubs. The application process includes assessing the applicant’s credit score and debt-to-income ratio.

Lines of credit provide revolving access to funds up to an approved limit, similar to a credit card. The application process mirrors that of personal loans, requiring documentation to verify identity and income. Once approved, funds can be accessed by transferring them to a bank account online. Home equity loans and Home Equity Lines of Credit (HELOCs) allow homeowners to borrow against the equity built in their property, using the home as collateral.

Credit cards offer immediate access to funds through cash advances, which can be obtained at ATMs with a Personal Identification Number (PIN) or directly from a bank teller with identification. Cash advances incur a transaction fee, and interest begins accruing immediately without a grace period. For small business owners, traditional bank loans or lines of credit are available, requiring business financial statements, tax returns, and a business plan as part of the application.

Generating Capital Through Operations

Generating new capital through ongoing operations involves strategies to increase cash inflow, applicable to both individuals and businesses. For individuals, increasing income through side hustles or freelancing can provide additional liquid capital. This involves identifying marketable skills and leveraging online platforms or local networks to offer services. Optimizing a personal budget by reducing unnecessary expenses also increases the amount of liquid cash.

For small businesses, improving cash flow management is important for generating capital. Accelerating accounts receivable involves implementing strategies for faster collection of payments from customers. This includes:
Prompt and accurate invoicing
Establishing clear payment terms
Offering multiple payment options
Consistent follow-ups for overdue invoices
Utilizing automated systems for invoicing and reminders can streamline the collection process.

Optimizing inventory management helps reduce capital tied up in unsold goods. Strategies like just-in-time (JIT) inventory and ABC analysis can minimize carrying costs and free up cash. Negotiating favorable payment terms with suppliers, such as extending payment periods or securing early payment discounts, can preserve cash within the business. Increasing sales and revenue through effective pricing and marketing efforts boosts cash inflow.