Posts Tagged ‘solving short term financial woes’

SMBs Need To Get Their Financial Houses In Order

August 1, 2015

If as many economists believe the economy will expand in coming quarters, in order to take advantage of new opportunities or even remain competitive will require many small- and medium-size businesses (SMBs) to seek additional funding.

While never easy, finding funds to maintain current sales and/or fuel growth is expected to be harder in the last quarter of this year and more so in 2016.

It is reported many larger banks are opening the lending spigots, other financing sources are tightening their programs.

Institutional lenders blame the advent of the full implementation of the Sarbanes-Oxley Act as a key reason for the changes. However, there are other factors at work.

None of them make funding searches easier.

Low, low interest rates have helped many SMBs to survive the five year economic malaise.

This life jacket may be sinking as the Federal Reserve Governors just signaled that the low to non-existent interest rates will soon be a thing of the past.

In recent years, new funding sources including crowd funding; websites offering individualized paths to multiple lenders; and other non-bank lenders appeared. These channels have experienced explosive growth as start-ups and SMBs sought funds to stay alive or for growth.

However, federal bureaucrats are beginning to eye these non-traditional financing outlets as avenues through which the opportunities for mischief are becoming more frequent, obvious.

For most of the recent depression, community banks and specialized lending groups were the main sources of funding for SMBs.  Over the past twelve months, these sources have been steadily withdrawing from the marketplace. While larger banks have taken up some of the slack, they have not fully replaced the monies no longer available.

Another factor is these larger banks take longer to make a decision and often require onerous terms.

Recent surveys by Information Strategies, Inc. and others indicate a majority of SMB leaders think good times are ahead.

They also anticipate they will need additional funding to meet the costs of satisfying higher demand levels.

Thanks to the revolution by Internet cloud offerings and other technology advances in simplifying the ability to start a new company, SMB leaders also are recognizing that the number of competitors in all fields will be greater than before the recession.

Given this evolving scenario small business leaders should be acting now.

Mitigating against their efforts are two factors:

The first is that many SMBs have depleted their reserves during the past five years maintaining themselves during the economic downturn. They therefore appear more vulnerable to lenders.

The second is that SMBs have found the funding sources are reluctant to accept much risk in their lending practices.

To improve their chances of finding funding, experts suggest SMBs start lining up credit lines or taking out fixed rate loans or accept those with limited interest rate escalation clauses before then end of the current quarter.

As one expert said: “The time to borrow is when you don’t need the monies immediately. This gives the owner/manager time to shop around for the best possible loan source.”

While difficult, it is important that SMBs have, build, or rebuild a cash reserve.

If indeed the economy is strengthening, now is the time to generate financing to take advantage of those new opportunities.

How To Alleviate Small Business Distress

December 18, 2009

2009 has not been a good year for many small firms.
In our surveys, small business respondents have talked about the failure of clients and customers to pay their bills.
“Its like a cascading waterfall, our customers don’t pay on time, we can’t pay our suppliers,” lamented one midwestern focus group participant.
Some smaller firms have been forced to contemplate closing or bankruptcy.
This is a drastic step that should only be considered as a last resort.
One supplier we know took a job and continues his business at night and on the weekends.
Here are some things a small business leader can do to alleviate some of these pressures.
* Pay only the bills that will close the company down if not satisfied.
* Talk to suppliers and stretch out payments and/or ask for discounts for prompt payment.
* Seek financial help from banks or business partners.
* Offer discounts to customers for quicker payment.
* Look at your current situation and try to take a long view of what is happening.
* Talk to your employees and ask them how they can help. (Never borrow from your employees by withholding pay, rather ask them what they can do to help the financial situation. Often, you will be surprised at some of the positive suggestions that come out of these talks.)
* Cut your own personal expenses to ease the mental pressure .
* Above all, be positive to employees and customers alike.
Our parents, grandparents and great grandparents often talk about the great depression.
Pundits say this last recession was/is as bad or worse than the depths of 1930’s crash.
Often, they look back and say that era encompassed some good times and a great learning experience.
View this year as a learning experience and remember to stay positive, things will get better.