Cash flow issues are the most popular reason for small business failure. While every business has its own financial circumstances, the majority of businesses that fall to cash flow issues likely have at least one thing in common: They didn’t make enough moves early on to prevent these misfortunes. The first few years of any small business are rough. Demand changes, expenses arise out of nowhere. Curve balls like this are unavoidable. In many cases, the main difference between businesses that are able to overcome early obstacles and those that cannot is that the former previously took measures to protect their cash flow. Their resources allowed them to absorb the blow without endangering operational funding.
One of the most effective ways to protect cash flow is through a small business loan or business line of credit. In the past, approval was only possible for established businesses. But in 2019, companies like United Capital Source frequently approve various business funding programs for younger and smaller businesses, even with fluctuations in revenue.
Smart business leaders do not open their doors until they have secured as much cash as possible. They spend years saving money, cutting personal expenses and selling whatever they can to make extra cash. This is especially important for people who are entering industries that are known for unstable cash flow, like restaurants, retail stores, or construction. With so much equipment and space to work with, unforeseen expenses are basically a certainty in the first year of business. Your brick oven might be in good shape, but you might need a new floor sink, a new paint job for your bar, or a new set of flat screen TVs. Some new business owners might be able to save up enough of their cash to cover these expenses. Others, however, must seek additional business funding.
Even if you have saved up plenty of cash, business financing experts still recommend taking out a business line of credit in your early stages. At United Capital Source, businesses that are just six months old are eligible for a business line of credit as well as a short-term business loan and other programs. A business line of credit is probably the best option since you can borrow different portions of the money whenever you want and fix problems before they escalate and take their toll on business.
You can’t blame an experienced business leader for scoffing at the idea of taking out a business loan when your company is just six months old. This suggests that the business doesn’t have a solid foundation for revenue and cannot cover business expenses on its own. It also seems like a deceptive way for a malicious business lender to draw a quick profit. But companies like United Capital Source do not work with businesses that are this young and not generating enough revenue to pay their bills. We are more interested in companies that are looking to invest in inventory, staff, marketing, or equipment. In today’s small business world, more resources are required for staying competitive. And the more money you make early on, the more you can plug back into your business.
Younger businesses that take out business loans or business lines of credit are able to build substantial cash reserves when their lives are less complicated. So, when their businesses are making more money later on, they can draw from their savings without compromising cash flow, or qualify for a large business term loan with highly convenient terms.
When you use personal or operational funding to cover an unforeseen expense, you have to worry about the consequences. You are essentially taking money away from another element of your business. This could jeopardize your ability to fulfill another obligation or slow down operations. When you use a business loan or business line of credit, on the other hand, you don’t have to spend time thinking about how you’ll offset the outcome of your decision. This gives you more time to concentrate on growing your business and fixing other cash flow issues. Companies like United Capital Source make their application and repayment processes extra simple for this exact purpose.
Despite the low interest rates and convenient terms of bank loans, many borrowers fail to pay off the debt in full on time. A major reason for this is a lack of experience with debt financing. When borrowers take out business loans earlier in their careers, they have less to lose and their businesses are easier to manage. By the time they are ready for a larger loan, they are well-versed in making regular payments without impacting cash flow. Knowledge is priceless in the business world, so it only makes sense to accumulate the most valuable skills as early as possible.
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