How Small Business Owners Can Stay Financially Strong During Tough Times

Small business survival guide: Steps you can take

1. Tracking government initiatives

   Since small businesses are an integral part of a developing nation’s economy, the government has been proactively announcing measures to alleviate their situation. As a means of beating the cash crunch faced by small enterprises, the government has announced several schemes guaranteeing loans for small business owners. 
    
   Aside from a small business loan, you can also get a tax filing deadline extension, an increase in the insolvency threshold for MSMEs etc. among other things.
    

2. Regulate your cash flow efficiently

   Conserving cash and ensuring consistent cash flow are crucial for mitigating the effects of an economic slowdown. This helps pay for rent, payroll, and utilities during the time of the crisis and ensures smooth operations after it.
    

3. Going digital

   If you are wondering how to grow your small business, technology has the answer. Taking your business online might allow you to offset some of the loss from the lockdown, as you can generate revenue through targeted marketing campaigns. Further, moving to digital payments, invoicing, order placing etc. gives you the advantage of reduced operating costs and a high degree of convenience. 
    

4. Getting rid of high-interest debts

   Clearing a small business loan in India is becoming increasingly easier, as financial institutions offer the option to restructure the debt and pay it off conveniently. Taking advantage of this and clearing your high-interest debt as a priority, can lead to financial stability in these tough times. 
    

5. Cut unnecessary expenses

   Given the present situation, there is an urgent need to take inventory of staff to see if they are all contributing optimally at this crucial juncture while also taking stock of other costs. Proper financial planning, which mainly includes finding and doing away with wasteful expenditure, can hold you in good stead during the crisis and beyond.

Also Read: Must to Know Facts to Get a Small Business Loan
 

1. Never mix your personal and business goals

   To improve the financial performance of your business, keep your business and personal goals separate. To understand this, let's use an example: 
    
   Consider a situation where you need to buy inventory for your business while also paying for your child's education. There are Rs 5 lakh in your company's current account. Now, what would you do? As a business owner, you should invest in inventory and take out a personal loan to pay for your child's education.
    
   It's vital to draw a thin boundary between your professional and personal requirements. Otherwise, you will find yourself in a dire financial situation.
    

2. Avoid drastic changes, have attainable goals

   It is worth noting that even experts are conflicted about what the post-pandemic economy will look like. Therefore, it would make sense to set achievable goals after accounting for the worst-case scenarios and even putting off some grand plans, such as getting a business expansion loan.
    

3. Explore your financing options

   You can customise business loan. But, not every loan is ideal for every situation. Before deciding on one of these business financing options, you should weigh the pros and cons of each. For example, if you are in the medical profession and want to buy a CT Scan machine, you may choose an equipment financing loan rather than a straight business loan. Similarly, if your needs are small and you need a short-term loan, a term loan would be a perfect choice.
    
   Remember, selecting the most appropriate financing choices can help to mitigate the financial crisis to a great extent.
    

4. Communicate with lenders and vendors

   Check with your vendors and lenders to see if they are willing to renegotiate payments and interest rates. Doing so can help in cost reduction and provide you with resources for other priorities.
    

5. Maintain liquidity

   Growing a small business is difficult if you don't maintain liquidity in your company. Having enough cash on hand and in the bank can assist you in overcoming a wide range of business challenges. It can assist you in paying off your business loan EMI, keeping up with the operational costs, and paying off your employees' salaries. Here are a few ideas that will assist you in maintaining your business's liquidity:
    

   • Sell unproductive or irrelevant business assets
   • Try to lower your company's overhead costs
   • Keep an eye out for account receivables and payables

    

Also Read: 5 Things That All Small Business Owners Should Consider Before Taking a Loan
 

Why is financial stability important in business?

• Financial stability in the business can help you keep an emergency reserve. When your company is going through a rough phase, such a reserve comes to the rescue.

• It can assist in the repayment of existing debt obligations. Not only will this reduce your debt-to-revenue ratio, but it will also boost your company's borrowing ability in the future.

• Financial stability in the business allows you to achieve your long term business goals with ease. If you are financially able, you can easily expand your presence, launch new products, hire a more competitive workforce, and more. 

The bottom-line

The need of the hour is to know how to survive a bad business situation. It might be hard but the above-mentioned suggestions can come to your rescue. You will not just have weathered the storm, but you will also come up with key insights, experience, and business acumen to deal with whatever challenge comes your way in future. It also goes without saying that once the crisis passes, you will be ready to dominate the market. 
 
Disclaimer: This post was first published on 29 July 2020 and has been updated for the latest information, freshness, and accuracy.