Tax time can be challenging for small business owners – especially when they expect a refund and end up owing the IRS instead. If your cash flow takes a hit each time your business incurs an unexpected expense, it could be a sign that it’s time to consider financing.
That said, business credit is more than just a quick fix for cash flow challenges – it is a strategic tool that successful companies rely on to thrive. Expanding inventory, enlarging your headquarters, hiring staff, launching a more aggressive marketing strategy, and upgrading technology all require capital. Financing provides a reliable source of funds for what you need to grow.
Regardless of the funding source you choose, you will need to analyze your current pain points, determine what you need to take your business to the next level, and consider the most cost-effective approach to meeting those needs. Just as you can’t always predict when you might need cash for an unexpected expense, you also need to be positioned to capitalize on a can’t-miss opportunity that suddenly comes your way.
Here are some of the most common indications that it might be time to explore financing options for your small business:
Cash flow is constantly an issue.
Cash flow can be a challenge for any business, even when you are steadily generating revenue. A cash flow crisis can be triggered by any number of factors, from a shortfall in sales or late-paying customers to higher-than-anticipated expenses. Regardless of the reason, the resulting inability to cover day-to-day expenses can put your business at risk. A study by the U.S. Bank reported that 82% of business failures are attributed to poor cash flow management.
Small business owners who find themselves delaying vendor payments, putting off inventory purchases, or struggling to make payroll on a regular basis might seriously consider financing. Working capital funding can provide the cash to cover temporary shortfalls so you can keep current with operating expenses.
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You’re short on inventory.
Inventory is one of the most difficult expenses to manage, and not having enough cash to purchase the inventory to fulfill orders is a common issue for small and growing businesses. You may be anticipating orders due to the launch of a new product line and need inventory on hand, or your business is seasonal and you need to stock up well in advance. Perhaps you’ve suddenly received a large order or picked up several new customers unexpectedly. Situations like these can wreak havoc if you can’t afford to invest in the inventory you need to deliver.
Asset-based lending is ideal for offsetting inventory costs so you can meet customer demand. Summit Financial Resources offers a variety of working capital loans that involve using your accounts receivable and other assets as collateral. We can mix and match products to suit your exact financing needs, including invoice factoring, inventory lending, and equipment financing.
Your staff is stretched thin.
It’s a common dilemma: your small business is booming and clients are happy, but despite putting in long hours, you and your employees are unable to keep pace. You know you are at the point where you need additional staff in order to grow, but you’re concerned about being able to cover the increased expense if business slows down.
Rather than cutting costs elsewhere, small business owners can use financing to cover the expense of hiring new talent as well as the increase in payroll. To determine whether or not this is a viable option, review your budget, decide exactly what skills you need, and determine what you can afford to pay for them. If you come up short, working capital financing can help you bridge the gap.
Your equipment or technology is outdated.
From forklifts to mobile devices, your business needs the best possible equipment to maximize employee productivity, provide reliable customer service, and stay competitive. As your business expands, it is essential to invest in new equipment, repair or replace what is broken or outdated, and keep up with rapid changes in technology.
If you’re experiencing outages, breakdowns, or slowdowns in system performance, consider whether purchasing or upgrading your equipment would improve quality or output. There is a lot at stake when it comes to making the right choices, especially if there are big-ticket items on your list. It is important to look at the big picture, evaluate your needs and objectives, and take into account the possible consequences of your purchase decisions. Keep in mind that working capital financing can help you manage the costs associated with purchasing equipment without impacting your cash flow.
You need a safety net.
Risk is inherent in running a business, and the wise small business owner plans for uncertainty. You have no way of knowing if or when the market will change or if a fire, flood, or power outage will force you to temporarily shut down. That’s why it’s important to create a financial cushion as part of your strategic planning process.
For some, this means creating an emergency fund with at least six months of operating expenses in reserve. For others, it means putting financing in place sooner rather than later. You may not need it today, but having quick access to cash provides the peace of mind that comes with knowing your business is well positioned to survive a disruption.
Financing is vital to small business success, and Summit Financial Resources will work with you to customize an approach that supports your unique strategy for growth.
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Summit Financial Resources specializes in working capital financing for small to medium-sized businesses that need increased cash flow. We provide working capital financing through invoice factoring, asset-based lending, inventory lending, and equipment financing.