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3 Financial Challenges for Small Business

April 3, 2017

Liquid Capitalvia Liquid Capital by Mark Glucki

When the going gets tough, it’s usually finance-related. Here are the three challenges you may be facing with your small business, and tips to overcome them.

1. Positive Cash Flow

Every small business knows that cash flow is a top priority. You need liquidity in order to channel funds into your other top strategic priorities.

According to Simon Dell at Business.com, this is a domino effect that not only impacts your business, but all the other businesses you work with.

“Personally I think the biggest challenge affecting any small business is cash flow. Every business, including mine, has suffered from, or suffers from issues with getting money in that is owed with them. The problem stems from a domino effect of one business having poor profitability earlier on in the chain that then starts to directly affect all the others, as many small businesses trade with other small business. Thus the situation compounds itself.”

The cash flow solution:

 Dell points out that this situation shouldn’t make you feel stuck in a cash flow rut.

“However there are a number of good solutions that can be implemented. The best two I have seen is invoice factoring – where another business loans you the value of the invoice that you’ve issued and pay you immediately. The second is to move your business, where possible, to a subscription business. If you can implement a direct bank transfer for services or goods at the start of the month, then that goes a long way to eliminating many cash flow issues.”

2. Money Management

It’s hard to find a small business owner who hasn’t felt the pressure of operating their business effectively while also managing all the day-to-day financial management. From dealing with expenses, receipts and invoices all the way to tax-time issues and end-of-year reporting, these are the administrative duties that most SMBs dread.

The money management solution:

Investopedia offers a straightforward solution: get professional help.

“Money management becomes even more important when cash is flowing into the business and to the owner. Although handling business accounting and taxes may be within the capabilities of most business owners, professional help is usually a good idea. The complexity of a business’ books go up with each client and employee, so getting an assist on the book keeping can prevent it from becoming a reason not to expand.”

3. No Access to Funding for Growth

“Year after year, owners listed access to funding as one of their most formidable concerns facing the future of their businesses,” states Ryan Weaver in The Globe and Mail’s business growth column.

Finding the right funding solution is important, as your business should consider loan repayment schedules and rates when weighing the options. Weaver goes on to suggest that, “Hundreds of small business grants and loans programs exist to help businesses expand, subsidize hiring, and allow firms to take part in projects and activities proven to increase global competitiveness.”

However, many SMBs face further challenges when traditional grant programs, government funding and bank loans aren’t an option. Often, small businesses can be denied loans when the company has a limited operating history, low gross margins or when their industry doesn’t fall within the bank’s criteria.

The funding solution:

Finding a trusted alternative lender can be the perfect solution in these circumstances. And many SMBs find trusted lending partners that they can build ongoing relationships with in order to access funding with much more ease. This can be a big advantage when business demands become timely, such as when you must fulfill an unexpectedly large order or hire more staff for a new project.

Business News Daily explains that alternative lending has some major positives. “Your business doesn’t need to have a perfect financial status, there are few restrictions on what the money can be used for, and the loans can be approved almost instantly.”

Asset-based lending may also be an option for businesses in a large growth phase that have significant business assets such as inventory, machinery or real estate to leverage. Consider looking at all the alternative funding options that can bridge you to the next step in your business growth. Your business is not restricted to traditional lenders and a trusted alternative source can give your business growth the kick-start it needs.

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