It’s no secret that small business owners have a tough job. Starting a business and keeping it healthy is a big challenge. Many small businesses close within the first five years, and even the ones that don’t close their doors can see significant financial troubles.
Global crises like the COVID-19 pandemic and wars cause and exacerbate many of these troubles, but so do financial mismanagement, disorganized accounts receivable and issues with scaling. These issues can be a direct threat to the survival of a small or large business.
Business owners facing these financial hurdles can feel like a hamster spinning on a wheel, running as fast as possible but never getting anywhere. However, there are ways to overcome these issues and get back on the path to growth. Here are some of the most common financial hurdles many small businesses contend with and how to overcome them.
Difficulties with Financing
It’s a fact that businesses need money to grow and thrive. However, banks are implementing stricter and stricter rules for loans and financing and are often entirely inflexible. Many small business owners have said they could not get access to the financing they needed from big banks.
Fortunately, there are other options for financing. Alternative lenders offer more creative solutions than big banks do by focusing their criteria on accounts receivable rather than financial ratios. Whether you’re looking for a line of credit to create more cash flow or financing for business equipment to grow your business, these alternative lenders can provide the flexibility your business needs.
Problems with Cash Flow
Inconsistent cash flow is a common problem for small businesses, but knowing that it’s common doesn’t make it any easier to deal with. This inconsistency can cause problems with operations, equipment maintenance, bill payments, and overall growth.
It’s important to develop precise cash flow projections to get cash flow back on track. Consider your historical cash flow data and account for contingencies, including recessions, changing consumer habits and new industry developments.
Not Expecting the Unexpected
When listing business expenses, most people tend to think about the ones that occur only when everything is functioning as it should (or as we want). But it’s necessary to have a plan in place for when things don’t happen as we want them to, like if your most important piece of equipment malfunctions and needs significant repairs.
These unexpected issues shouldn’t catch you completely off guard. It’s important to be aware of all the potential scenarios and risks so you can have contingency plans in place. It will still be unpleasant and stressful when the unexpected occurs, but it will be much easier getting things back to the status quo when you’ve thought about that scenario in advance.
Proper planning and foresight can help you avoid and overcome common financial issues many business owners face. This can help you and your business prosper for many years to come.