Wouldn’t it be great if you never needed business funding. Imagine if you had enough to cover your first several years in business, and if you wanted to grow, there would be money to invest in that? Ideally you’d have investors falling all over themselves to get a piece of what you’re selling.
Unfortunately, that’s not reality. The fact is, if you run a small business, there are most likely going to be times when you need help with funding. This can be when you’re a new business, when you’re growing, or even when you’re well established. As a small business, there will almost certainly be times when you need a little cash. Here are top reasons why you might need small business funding.
You’re Just Starting Out
When you’re just starting out, you might need more cash then you realize. Too many budding entrepreneurs don’t take into consideration the funding they will need to run their business during the opening phase. As you launch, it will probably be a little while before your profits cover your costs, pay back debt and leave some for in your pocket. Plus, small businesses don’t have a history, which makes it hard to get a loan with a decent rate.
You will have to pay for your rent or mortgage, a fully stocked inventory, machinery, software, staffing, and any number of things that might pop up. You can’t afford to be scrambling for cash when something breaks down, either. So getting enough funding means enough for your launch, and then enough to cover well into the future.
To Cover Cash Flow Problems
There are many reasons why a business, especially a small business, might have cash flow problems. If your margins are too thin, then unlucky timing with some invoices being paid might mean the difference between making payroll or not, for instance. Also, a seasonal business might do really well in the summer, but miscalculate how much they need to save for the fall and winter time. Cash flow can be tricky until you’re well-established and have things figured out. Therefore, sometimes some extra funding can cover the gaps until you are bringing in the revenue you need.
If you are looking to purchase property, there’s a very good chance that you don’t have the capital on hand to cover all of it. Nobody buys property with cash. You will need some help in the form of a mortgage. You might need new property for several reasons. You might need additional storage space or offices, for example. When you do, make sure that you get the best interest rate as possible during the financing process.
To Purchase Equipment
Let’s say you are outsourcing the production of your product. However, you realize that it will be cheaper for you in the long run if you make it yourself. Or, perhaps your fleet of vehicles is getting a little long in the tooth, and it’s time for an upgrade. Purchasing machinery to make your product or buying several new vehicles will cost a substantial amount of money that you most likely don’t have on hand. Funding may be the only solution for you to make these large purchases that will eventually benefit your business.
You Want to Expand
There’s always an awkward time between the status quo and when you feel like you can expand or scale up. You want to put in the investment to expand and grow, but you haven’t quite gotten to that point with your revenue. However, if you don’t build that infrastructure, you won’t be able to grow. You need to get capital in order to expand, and it can tide you over until that growth is truly there. You don’t want to be too late when it comes to expanding. If you’re not prepared, you will be understaffed and your production may not be able to keep up with demand.
You always want to have enough inventory on hand. If a customer visits your website and they see everything is labeled “out of stock,” they will click away and never come back. Or, if they are walking through the mall and see your store’s racks are empty, they won’t come in. The fact is, having low inventory is a death knell. If you are running low and don’t have the cash to replenish, then you will need some funding to get you through.
As you can see, there are many reasons why you might need business funding. What form that takes will depend on your situation, and how fast you need the funds. Get started right away to prepare so that you don’t get caught without cash.