While your business is growing, you need a constant influx of capital to have continual growth for your business. Understanding when your business needs working capital and quickly taking action to secure it can help get you to leverage a new opportunity, avoiding cash crunches, or simply be resourceful regarding your debt.
For any small business to expand and grow, having capital in place is a must thing. As a business owner, it’s fundamental to understand your additional business financing needs, more importantly, when you should look for that additional funding.
There could be any reason as to why you need capital: you might need it to increase production to meet increasing demand, or invest in new technology or purchase new inventory. Maybe the cash flow is tight and you need cash before the holiday seasons. In such situations, securing a small business loan can help. How do you know when it might be the right time to secure funding? Look for these five signs when your business may need funding sooner.
- Business Cash Flow Management
Cash is king and to make your small business success, effective cash flow management is the key. Cash flow management is the most common issue for many small business owners. Ineffective cash flow typically management results in negative cash flow – making businesses stuck for cash. This negatively affects businesses that need to spend more cash than is available.
Regardless of the reason, negative cash flow can seriously affect your business performance and should be a reason to worry. Having a strong cash flow provides the ease and competences a business needs to invest in growth and expansion. Strong cash flow also indicates how viable your business is. When you need that extra capital to manage your cash flow, a working capital loan can help you during your growth periods.
- Business Growth and Expansion
Apart from making your business viable, it also needs growth and expansion that require additional capital support. Different businesses have different expansion plans from adding a new business location, renovation to offering new products/services, and expand marketing.
To fund your expansion plan, a small business loan is a suitable option. Sometimes, funding such expansion plans can be expensive especially when the cash is tight and business is not generating enough revenue. Funding such plans with a small business loan is a wise decision.
- Cash Cushion
Effective planning is the main ingredient of small business success. Having a cash cushion should be an important part of your business planning. As a business owner, you need to have a cash cushion for at least a few months for operational overheads. Every business has to undergo different cyclical changes and having a cash cushion can help go through those changes.
Businesses have ebbs and flows. Having some money saved for the ebbs can help in case of a rainy day. Some businesses also have to stock up inventory, and if you have the money reserved as the cushion, it can help with the purchase – saving you time and money eventually. Moreover, you can also use a cash cushion to reinvest in your business growth.
To stay competitive and ahead of the game as a business owner, you have to be tech-savvy. With the advancement in technology, small businesses need to adopt technology in their business processes to stay current and competitive. There might be a time in your business when innovative technology needs to lead. You can use technology in your research and development phase, or new products or services offerings.
The cost of technology is on the rise, and this may be a sign when your business needs additional capital to stay competitive and tech-savvy in today’s business environment. This is even more important for businesses that are technology dependent, when your machinery is having mechanical or technical hitches, resulting in interruption and lost productivity. This can have a significant impact on your bottom line. When your business needs investment, getting business funding can help keep your business afloat while keeping your financials intact.
- Staying Competitive in the Market
When your sales are low, the staff is unable to requests and fill sales orders, and demand for your products and services surpasses your capability to provide them, this may be a sign when you need to apply for a working capital loan. With the help of additional funds, you can hire experienced staff, automate your sales processes, buy inventory, reinforce customer support, introduce effective tools to increase production or expand your offerings.
- Managing High-Interest Debts
Your business might be lingering on high-interest debts and it starting to strain your financials. Small business owners typically choose to refinance their debts at lower interest rates. When your business carries significant credit card debts on other obligations, consider lowering your expenses by taking out a line of credit or term loan to pay down those debts. This will not only help you remove the debt load from your financials, but also improve your overall financial health, making you a viable prospect for lenders and investors.
- Improving Business Visibility
It takes effort and money to keep your business in the spotlight and in front of your customers. If you’re not investing in marketing, your business visibility will start to fade.
In order to increase your outreach, determine how much you need to spend, and what will be your return on investment (ROI). When considering advertising or an email campaign, determine how much sales leads you’re expecting. Whether advertising is a good idea to bring in new business, or you might need assistance from experts to help your business get off.
The Bottom Line
We’ve listed every possible sign when your small business should seek working capital loans to grow and succeed. If you’re seeing any of these signs in your business, start seeking out your business financing options now. While searching for your loan options, the most common business financing options worth considering include alternative small business lenders, traditional loans, merchant cash advances, angel investors, lines of credit, SBA loans and crowdfunding.