Why being liquid isn’t a strategy: Rethinking credit as a growth lever for SMEs

Most business owners grow up with the same mindset: credit is something you use only when cash is tight. So when we recently spoke to a customer about Mimo Flex, his reply summed up a common belief:

“No, I’m good. I’m liquid.”

And he was. But liquidity isn’t always the same as opportunity.

Some of the strongest, most stable businesses use credit because they’re liquid, not because they’re short on cash. In today’s economy, where cash flow affects everything from supplier pricing to growth speed, credit isn’t just a safety net.
Used well, it becomes a strategic tool.

Here’s how SMEs can rethink credit beyond emergencies

1. Liquidity is comfort. Credit is leverage.

Having cash in the bank signals health and stability. But the better question isn’t: “Do I need credit?” It’s: “Should my cash be the first thing I spend?”

Often, the smartest answer is no. Keeping cash in reserve preserves resilience. Using credit for the right activities creates leverage. The kind that strengthens operations rather than stretching them.

Smart use of credit means:

• Freeing up cash for revenue-generating activity

• Negotiating better terms by paying suppliers early

• Smoothing out timing gaps without slowing operations

2. Credit and the Cash-Conversion Cycle: Your secret growth multiplier

Every SME knows the feeling: money goes out long before money comes in. That gap, the cash-conversion cycle (CCC), determines how much working capital you need just to keep things moving. The longer the gap, the more cash your business has tied up. This is exactly where strategic credit creates momentum.

How credit shortens the cycle and accelerates growth:

Unlock supplier discounts by paying upfront
Suppliers reward certainty. Early payment can lead to:

• Better pricing

• Priority service

• Stronger long-term terms

Keep liquidity focused on growth
Your cash can go into sales, production and opportunities and not sit in unpaid invoices.

Maintain momentum during timing gaps
You don’t need to delay buying inventory or materials simply because you’re waiting to be paid. Used well, credit keeps your operations moving and your cash working harder.

3. Credit vs Equity: When each makes sense

Many SMEs default to raising equity because it feels safer than borrowing. But equity is the most expensive form of capital – once you give it away, it’s gone.

When equity is the better option:

• Long-term product development

• Entering new markets

• Big, strategic bets with long payoff cycles

When credit is usually the smarter option:

• Inventory

• Supplier payments

• Confirmed orders

• Short-term working capital

• Anything tied to predictable revenue

The Bottom Line

Being liquid is a strong position. But liquidity alone isn’t a growth strategy. The businesses that grow fastest and stay resilient are the ones that pair liquidity (stability) with credit (leverage).

If you want to explore how Mimo Flex can support your cash-flow strategy, we’re here to help.