The Perfect Time To Get Small Business FundingUnlike other entrepreneurs who started their business by formulating a business plan, filling up a loan application form and gearing up for the long wait for the loan's approval. This young businessman was able to start his computer shop from money inherited from a parent. From the start, there seemed to be no problem with small business funding. And even as the inheritance money ran out he was not worried because it seemed that the shop's profits were good. There were some "small problems" but he did not give much thought to them until 4 months later when he had to sit down with a financial advisor for help in salvaging his business. What is his problem? It's overtrading. This can happen stealthily and for those who are not wary or alert enough, the sudden lack of liquidity can leave you parched or worse, leave your business totally high and dry. So how does one know when it is necessary for a fresh burst of small business funding? There is need for additional small business funding when you notice that instead of increasing, your bank balances are shrinking with more withdrawals than deposits. If you are in the business of selling items and products watch out for the time intervals between issuing notices for payment and actual payments by your customers. Avoid making up for late payments by clients with your own money or worse, from your own business funds. This is a vicious cycle that will disrupt your balance sheet and make you commit mistakes on payment disbursements. Remember that late payment is as good as lost profit. You may need fresh small business funding when you yourself begin to miss on payments that you owe to your suppliers. Sometimes this happens as a result of that vicious cycle that was mentioned earlier when you cannot collect money from your customers. The implications of defaulting on your own payments can further impact on your funding problems. Some businesses rely on prompt payments for certain goods or supplies in order for prompt deliveries for those goods and services. In some cases, if you cannot pay, the supplier stops deliveries altogether. At this point, it is absolutely clear that you may need an additional fresh inflow of small business funding. You would not like the situation to get worse to the point when you become unable to pay utilities, taxes, business leases for space or equipment and wages for your employees. When this happens, additional small business funding may no longer be as important as getting yourself a lawyer. But do not get the impression from these case examples that small business funding works best as a stop-gap measure. Given that your business is given a fresh inflow of funds, the problems you are facing are temporarily solved, but not the deeper problem that caused them in the first place. Chances are, if your business is built on a shaky financial ground, no amount of endless funding will save it from going into the same spiral. You have to correct the flaw at its root. Smart small business funding should be one of your business's most important cornerstones and not a mere bank account to draw funds from when the need arises. |