Running a small business isn’t easy. The life of a business owner is full of hard work, big stress, and not many rewards. On top of that, even in favorable economic conditions, small businesses face challenges when it comes to money. Because the financial well-being of any small business directly influences its success or failure, being prepared with backup plans can be a lifesaver. However, there’s still a chance that bad luck or poor planning could put a small business in a difficult financial position. So, here are four effective solutions a small business can get financial help when needed.
Get a Loan
This is the most common solution to financial problems for small businesses. Even though lending money to small businesses isn’t always easy, it’s still possible to get one when needed. There are several types of loans available from banks including commercial real estate loans, equipment financing, inventory financing, SBA loans, term loans for funding major projects or paying bills in the short term.
When applying for a loan with a bank, it’s necessary to have all supporting documents ready and prepare yourself for questions about your business’s financial health. Many startup businesses also use payday loans as their first point of call when they need an extra infusion of cash. These loans are usually short-term, with maturity periods ranging from one week to one month, but some loans can be as short as a day. They usually have a high fee associated with it, but they should be able to keep your business afloat until you find other sources of financing from banks or investors.
Make a Deal with Creditors
If small businesses get into serious financial trouble, one solution is to work out deals with creditors who hold debts the business owes them. When doing so, it’s important to differentiate between unsecured and secured claims, because making payments toward both types of claims may not be possible when running short on cash. Unsecured claims are more difficult to deal with than secured claims since these typically include loans that don’t come attached with property used as security for repayment plans. One option if you’re unable to pay back unsecured debt is filing for bankruptcy which will legally release you from all your debts.
When dealing with secured claims, it’s possible to negotiate a repayment plan that could reduce the obligations and interest rates attached. For example, credit card companies often accept reduced payments if the borrower is experiencing hard times. Equipment lenders are also known to reduce loan amounts or interest rates when payments can’t be made on time. Regardless of the type of secured claim, though, creditors are more likely to accept repayment plans if the borrower’s assets are sufficient to cover debts.
Another solution for getting financial help when needed is by finding investors who invest their capital in exchange for small pieces of ownership or equity in return. These investors not only provide much-needed funds but also bring expertise and knowledge into a business through experience or market insight. If you do decide to look for investors, it’s important to make sure they are credible and stable since the last thing you want is getting caught up in financial trouble.
The best way to find investors is through referrals from friends and business associates since personal connections cut down on the time it takes to raise investment capital. Also, most investors like to deal with businesses they know and trust because this gives them a measure of security knowing that their investments are safe, especially in times of financial crisis where money can be difficult to recover, so personal connections and reputation go a long way.
Get Assistance from Government Programs
If small businesses face financial struggles like lack of money, lack of work, or other issues that prohibit them from running their business effectively, then one option is to find assistance or programs that can help. There are different programs available through both federal and state government agencies which offer support depending on the type of program chosen–funding, hiring incentives, loan guarantees, etc.
For example, if your business is looking for capital but has an unimpressive credit history due to past financial struggles, applying for low-interest loans could be an option worth exploring. One thing to remember is the importance of doing research ahead of time since there are various requirements businesses need to meet to qualify for assistance.
Choosing one or more ways to get financial help when needed would depend on what stage a business currently finds itself in because some options are better suited than others depending on whether it’s growing, stable, or struggling. However, these four solutions can be tailored to any stage of your small business, so if you ever find yourself in money trouble again, knowing your options will significantly help you in making the right decisions.