Having cash on hand is crucial for any business to survive. Without enough liquid assets, you could easily get behind on key bills, be unable to make payroll, or even have to shutter your whole operation. Yikes!
The good news is, businesses know this. In a recent global survey of small businesses, Sage found that “access to capital and funding” was listed as the second most important business challenge. Here are four ways to get that access and ensure you don’t find yourself in a financial pinch.
Take the opportunity to review your budget to see where you can cut costs. You may be able to renegotiate with suppliers for lower rates. You may be surprised at how much money you can save by simply asking.
Try things like new quotes for everything from office supplies to Internet services to shipping prices. Contact existing suppliers to renegotiate lower prices and extended credit terms. Consider working jointly with another business to share resources, such as equipment and staff. You can also identify and sell underused assets—you can rent most things instead of buying them.
Raise more funds
The obvious way to raise more funds is to add in your own capital. Be sure to consult with your personal financial advisor and accountant beforehand to make sure you can afford it. You could also raise money from relatives or friends. If you don’t have any more of your own money, approach your bank to discuss available financing. Keep in mind to approach your bank long before you actually need access to cash—banks may view a cash crisis as a reason to reject your financing application.
Another idea is to sell part of your business to key employees. You may not favor this tactic during good times, but during tough times it can increase your working capital and increase the motivation of key employees. Their money is now on the line, too.
Seek outside investors
Investors will typically want an equity stake in your business before they part with any funding. Like banks, they will also want to see a clear “value proposition” in the form of a business plan and full supporting financial documents before they consider supporting your business with funds.
Explore grants and financial assistance
You may be eligible for various government grants or subsidies. It’s not necessarily your first choice of funding, but certain industries and regions are supported by government programs. Federal, state, and local governments offer a wide range of financing programs to help small businesses start and grow their operations. These programs include low-interest loans, venture capital, and scientific and economic development grants. Begin your research at the U.S. Small Business Administration.