Business

Staying Solvent: The Steps To Better Business Finances

Chloe Harwood
Written by Chloe Harwood

The one thing they don’t tell you in business school is just how hard it is to keep a business’s finances in order. And let’s face it; the euphemisms they use don’t cut the mustard when it comes to the real thing. The real thing is a battle of attrition that can take years to fix, and you might not get out the other side feeling any better. You might end up on the scrapheap like eighty percent of first-time businesses in the industry. Still, does that mean you should give up when the going gets tough? No, it means you should fight back and try your hardest to keep your head above water. To do that, you need to understand the tricks of the trade. Staying financially solvent is as much about knowledge as it is taking action. After all, there is no action without knowledge. At least, there is no analytic or decisive action without knowledge. For those of you with no idea how to get the books in order, here are a few tips that will come in handy.

Get A Bank Loan

You don’t have any money and you need money fast, right? The obvious option, then, is to go to a bank. Banks have billions of pounds of money that are willing to lend to the right person. The good news is you only need a fraction of the amount, but the bad news is they don’t hand them out willingly. To get a loan, you have to prove you are capable of making the repayments. That means you need a good credit score or a history of managing your debts. Businesses that are too far gone won’t be able to use this option because their finances will ruin their chances. Hopefully, your business won’t be too far down the creek without a paddle because it means you have a shot at securing a loan. Just make sure you understand the terms and conditions, and you are sure you can pay back the loan. Even though the banks are vigilant, they do lend to organisations that aren’t capable of settling their debts. If you don’t believe mistakes happen, take a look at the 2008 crash.

Go To A Credit Union

Getting a bank loan might not be an option if your credit score is bad, so you need to find an alternative. The best alternative is a credit union loan. First of all, it is important to outline what credit unions do to understand them better. Quite simply, they are almost small banks that provide loans to people with financial difficulty. The aim of a credit union is to help individuals who can’t rely on Barclays or Santander. However, they aren’t as big as banks and don’t have the same financial muscle. As a result, they are only a good choice if you have small debts or need a small amount of money. If that is the case, you can obtain an alternative cash flow option that is flexible and instant. Go to your local union for more information and to see if you fit the criteria.

Juggle Credit Cards

Credit cards are often enough to make people shiver with trepidation. Sure, credit cards can be nasty if they don’t get the respect they deserve. There are far too many people wallowing in credit card debt not to admit they are a dangerous form of finance. However, they aren’t the devil and they are a viable source of cash flow if your business needs quick money. A supplier might give you a cap of £2,500 to £5,000, which is a lot. You can then use all of this money to fix your money problems and pay off your debts. What about the debts from the card(s), you ask? Well, they aren’t the most immediate problem because they are quite flexible. For starters, you only have to pay off the minimum each month which gives you a lot of breathing space. Secondly, and more importantly, you can switch the balance to a new card. That means you can pick the card with the most benefits to keep your card debt off your back. You can even do it for a long time providing you can always make the switch.

The Finance Factor

Have you ever heard of factoring companies? Factoring companies are firms that mainly buy debts and assets from you in exchange for money. That means you can sell your assets to them and receive cold, hard cash instead of being equity rich. Positive equity is good, but it isn’t much use if you need cash upfront to keep your finances in the black. That’s why the clothing industry has used factoring companies for years and still does to this day. Information is valuable, and there is plenty more at FactoringDirectory.org if you are struggling with the concept. The important thing to remember, though, is that it is quick cash. Of course, some negatives might put you off, like the representative APR. However, that is a decision you will have to come to after looking at the method and weighing up the pros and cons. One thing you should know is factoring has become a lot more popular since the economy started to slow down.

Software Over Employees

Labour is often the most expensive cost for any business. Employees expect a certain amount of money to perform a job, and they won’t accept any less. If you want the best of the best, you will have to pay even more which will increase your labour costs. And, to make it worse, you can’t run a business without a great workforce. Or can you? Sure, it isn’t viable to run a business without any employees, but you can cut down on the total amount with the help of technology. The right software will do the job of two or three people, so you will only need one person to oversee the process. The other two or three are dead weight and you can strike them from the books. It is amazing how much money this will free up for other things, even if it does seem harsh. To stay afloat, you have to do some ruthless things, and sacking employees is just the start.

Attract Investors

Seems odd you would try to attract investors when the business is on the brink, yet it isn’t that strange. The reason it isn’t strange is that investors are always on the prowl, even when a business isn’t in great shape. Investors want to make money, and they don’t care how they make it, which is why they will gladly invest. Want to know a dirty little secret? Failing businesses are where the real money lies. They have plenty of assets and are willing to sell equity in the firm for a fraction of the price. If the business’s fortunes do turn around, the investors are in the money and they don’t lose much if nothing changes. From your point of view, you get a second chance without sacrificing too much. As long as you don’t give them a controlling share, you will still be the boss.

Crowdfunding

Thanks to the internet, there is a lot more opportunities to find money. Crowdfunding sites like www.kickstarter.com are the most popular in 2017. So, what are these sites?  They are sites where you describe your business idea and ask average people to pledge money to help you out. They only have to pledge a small amount, but the logic revolves around many hands make light work. If a million people pledge a pound, you will have a million pound give or take fees. It is a popular medium because plenty of businesses have used it to their advantage and continue to do well to this day. All you have to do is make sure people understand your plight and why they should pledge. The more unique you can make it, the better chance you have of obtaining the money.

Ask Family & Friends

If all else fails, you can always go to your family and friends. The good thing about asking them for money is the flexibility. For instance, you don’t have to pay them any interest on the loan unless they add it to the terms. As a result, you don’t have to worry about having the bank on your back and taking your business as collateral. According to http://quickbooks.intuit.com, there are negatives that you have to watch out for when agreeing to a loan. But, for the most part, the positives outweigh the negatives. So, if you know someone who is willing to provide you with the finance, you should think about swallowing your ego.

There will come a time when your business suffers from financial difficulties. However, you shouldn’t panic and make the situation worse. What you should do is use a combination of the techniques about to fix the problem.

About the author

Chloe Harwood

Chloe Harwood