All companies experience financial ups and downs. No matter what industry you’re in, changes in market conditions, the economy, interest rates and more can affect your income.
A downturn doesn’t necessarily mean you are headed for closure. There are some things you can do when money is tight. Here are six ideas.
1. Assess Why You’re Low on Funds
The first and most vital step is addressing the reason behind your low cash flow. Some questions to ask include:
- Was the loss gradual or sudden?
- Was there a significant, unplanned expense?
- Are customers failing to pay on time?
- Did you have an increase in supply or inventory costs?
You might be unable to pinpoint one circumstance as the reason for slower cash flow. It may be an accumulation of factors. However, you can address the causes once you know them and plan future strategies.
2. Take Out a Line of Credit
A business line of credit works like a business credit card. It also has similarities to a business loan. Like a loan, a business line of credit gives you access to funds you use to take care of company expenses. Unlike a loan, however, the money does not come in a lump sum that you repay monthly.
You pay interest on the money you draw. Once it’s paid back, you may borrow it again — except for interest — as you pay down your balance. Your lender limits the amount you can borrow, just like a credit card. If a line of credit seems like a solution, shop around. Reading a Headway Capital review can help you learn more about this type of funding and help you make the best decision.
3. Talk To Your Bankers
If you’ve maintained a solid relationship with your bank by paying bills on time, it would likely prefer to keep your business. Talk to your banking representative about your options. You may be able to obtain an extension on your credit limit.
4. Negotiate With Your Vendors
As your bank probably wants to continue its relationship with you, your vendors may prefer to work with you rather than lose your business. Talk to your representatives and see if you can work out a satisfactory payment plan for both parties. They may also be able to offer you a discount or extend your payment due dates.
5. Reduce Expenses
Cutting business costs can be tricky, but it’s an effective way of conserving money. It may also be easier to reduce expenses than increase funds (although you probably need to pursue both strategies).
Some ideas for reducing business expenses include:
- Using inexpensive digital marketing
- Assessing your service subscriptions and reducing or canceling as necessary
- Evaluating your contracts and negotiating when possible
- Doubling down on time management
- Reevaluating your workspace and consider moving to a less costly facility
6. Apply for a Grant
You may be able to obtain a grant to fund your company. Many federal, state, corporate and local grants are available to small businesses. Some are open to any small business that meets certain criteria, while others are geared to specific industries or groups of business owners.
The advantage of a business grant is that you don’t have to pay the money back. It is easy to find grant information online; a quick search reveals many. Once you obtain a grant, your company gains credibility. You may also find it easier to get other grants — organizations see your success and view you as an excellent place to invest funds.
Grants can be time-consuming to apply for. They usually have restrictions and conditions tied to them, and there’s no guarantee you’ll be able to renew them. Still, they can be worth the effort to keep your business afloat.
You have several options available when money is tight in your company. Monitor your expenses diligently and pursue opportunities to add funds or cut costs. Hopefully, your downturn is temporary, and you can return to business on solid footing.
