If your small business has been hit hard by the coronavirus pandemic, there are plenty of financial recovery options. From grants and loans for entrepreneurs to private and online lending platforms, there are numerous programs that can assist like Les denne hos Finanza.
The Small Business Administration’s Paycheck Protection Program, for instance, offers money to small businesses that need it for employee retention purposes. Unfortunately, the funds may run out again after only a few days have elapsed.
1. Rebuild Your Credit Score
If you are seeking to capitalize on an unexpected opportunity or struggling to make payroll, a business loan can provide much-needed assistance. Unfortunately, many small business owners cannot qualify for traditional loans due to poor credit histories, leaving them without access to necessary funds for survival.
Fortunately, there are steps you can take to help rebuild your credit and increase the likelihood of getting approved for a loan. The initial step is understanding how personal and business credit scores work and how to utilize them efficiently.
Your credit score is determined by several factors, including your payment history with lenders and vendors. If your score is low, creating good payment habits and paying down credit card debt can help improve it.
Diana Nichols, president of Gold Key Consulting, stresses the importance of keeping credit card bills and other revolving credit from being too high in order to avoid negative factors that could negatively affect your overall credit score. This is especially pertinent if your business is new and hasn’t established a credit history yet.
Before applying for a loan, get a free copy of your credit report and review it carefully for any mistakes. Be sure to dispute any discrepancies found in the report.
Another way to increase your credit score is by building a solid business credit history by making timely payments and remaining below 30% of available credit. This will demonstrate to lenders that you can responsibly handle a loan, increasing the likelihood of approval.
If you’re trying to establish a business credit history, setting up your company as an S-Corp, C-Corp or LLC (limited liability corporation) can help make you and your employees appear separate from the business and make you eligible for grants and financing.
Lenders will consider several elements to assess your creditworthiness, such as personal and business credit scores, how long you’ve been in business, and your financial projections. If your sales are strong and you possess experience managing a business venture effectively, lenders may grant you access to funds without needing personal guarantees.
2. Boost Your Cash Flow
If your business is facing economic strain, a slow sales cycle, or another issue that’s impacting revenue, long periods of negative cash flow can leave you scrambling. Unfortunately, these challenges often come out of nowhere and if not addressed quickly, can put the wheels of progress in reverse.
Fortunately, there are financing options that can help you increase your cash flow and manage it better. These choices vary based on your financial health, credit score, and annual revenue.
Traditional financing sources like bank loans require business owners to pledge collateral as security for the loan. This can be especially challenging for smaller businesses that may not have many assets to use as security.
Financing options for businesses come in many forms, from lines of credit to business credit cards. Companies such as Kabbage even offer cash flow management services for business owners.
These financing alternatives can help your business increase cash flow by paying off outstanding debts, freeing up capital for other uses. They may also provide short-term funding to encourage growth and keep your company afloat during trying times.
If your business is having difficulty generating cash on a daily basis, consider reviewing your operating expenses. Are you spending on things that could be done without, such as software or employee salaries? By cutting back on these costs, you could potentially save thousands of dollars and ultimately improve cash flow over time.
You could also try automating your invoices and payment process. Tools like Wave allow for recurring invoicing and setting up automated reminders to encourage customers to pay on time.
Finally, you could consider taking out a merchant cash advance or invoice factoring. These cash-flow loans offer you access to additional working capital without needing collateral for security.
These financing alternatives may not be as quick or straightforward to qualify for as asset-based bank loans, but they can still provide a useful solution for businesses needing extra funds. Furthermore, it helps you avoid having to rely on personal lines of credit or business credit cards which often carry high-interest rates and charges.
3. Manage Your Cash Flow
Controlling cash flow is an integral part of running any business. A healthy flow of funds helps you meet day-to-day expenses, such as paying staff and suppliers, purchasing inventory, and paying off loan repayments. On the contrary, a lack of liquidity can make it difficult to stay afloat and even put your company in jeopardy.
Fortunately, there are several strategies you can utilize to increase your cash flow. These tactics include invoicing customers promptly, liquidating inventory that doesn’t sell well, and closely monitoring where the money goes. Furthermore, you may secure financing before running low on funds or restructure payments in order to free up additional funds.
One of the most essential steps you can take to manage your cash flow is setting an achievable profit goal. This helps focus your efforts on reaching that target and serves as a gauge for measuring progress over time.
Create a cash flow forecast to anticipate how much you will receive and spend over the coming month, quarter, or year. A forecast can also assist in making changes in your budget such as adding new pricing or hiring additional personnel.
Consider using a cash flow management system, such as accounting software, to monitor your business’s financial transactions. Accounting programs provide an overview of your company’s finances and can assist in prioritizing where money should be spent.
Another strategy is to negotiate better terms with vendors, which could free up cash. This could include offering discounts for early payment of invoices that need payment before they’re due. While this can generate extra funds, remember to factor these savings into your profit margin as well.
Finally, be mindful of how seasonality can impact your cash flow. It may become challenging to get paid on time from customers during these times, putting a strain on your resources. To avoid this scenario, make sure you send out invoices promptly after receiving them from customers.
When applying for a small business loan, be sure to include a cash flow projection as part of your application. This will demonstrate to your lender that you have the capacity to make payments on time even if unexpected circumstances arise. Ultimately, the loan officer will decide if you’re an appropriate candidate based on how well you can repay the amount borrowed.
4. Make Payments on Time
Bank loans can be a great option for startups with strong track records, but online lenders offer much better rates and terms than their brick-and-mortar counterparts. When searching for the best rate, it’s wise to get several quotes and compare each lender individually. Also, keep in mind that most lenders charge an administration fee or deposit which varies by lender and is usually refunded if you pay back your loan on time or fully. When shopping around for rates, remember that most require some form of fee for their services; this fee or deposit may vary by lender but is usually refundable if repaid on time or fully.