Business failure is a reality. But it doesn’t have to be your reality. We look at six examples where business finance could have meant the difference between success and failure for a small business.
Many small businesses don’t make it past their two-year anniversary because they were subject to inadequate financing at the start. When a business isn’t working out and is struggling to gain traction in a market, they aren’t always in a strong position to ask for more money. It often starts when a small business tries to stretch insufficient finances before establishing itself, leaving a lot of money to repay.
Having a detailed business plan right from the start can highlight potential bumps in the road ahead and signal a need for either a bigger start-up loan or a guaranteed facility where additional money can be borrowed.
Poor cash flow
When a business doesn’t have enough money to pay for materials or stock before selling its own end product that is a cash flow problem. It is the lifeblood of any business and a lack of it can be caused by having too much tied up in unpaid invoices or unsold stock and being subject to poor credit terms; quick to pay, slow to get paid.
A small business loan can often be the difference between survival and going bust. It can allow a business time to restructure its supply and credit agreements while facilitating the day-to-day costs of running a business. It is interesting to note that the final nail in Woolworth’s coffin was cash flow when suppliers changed their terms and demanded payment upfront causing the retailer to file for insolvency.
Failing to react to technology
The marketplace can be a fickle beast where the most successful companies aren’t always the ones that thought of the idea in the first place (remember Betamax?). When companies fail to react to changing technology it opens the doors for others to steal their market share.
The blame is usually a lack of investment in new technology which could be negated by having a small business loan to cover the costs. On a much bigger scale, the retail chain HMV suffered this exact fate, not reacting to the changing online habits of music listeners and suffering the consequences.
A poor location doesn’t just mean how many people pass by your shop every day, it’s also being too far from transport links like motorways or main trunk roads that cost you too much in fuel bills. It could be that your warehouse isn’t big enough for the stock you need or that access isn’t good enough for your suppliers or customers.
Let’s face it when you outgrow your premises, it can be a real drain on your potential growth, which can harm your relationship with customers. Having a business loan can make that business move affordable, meaning you can continue to grow, uninhibited by a lack of space or a poor location.
No online presence
Your online presence is invariably as important as your offline one. Having a poor website or social presence can be just as damaging.
Multi-functioning websites can cost a lot, as can the marketing needed to ensure your location on the internet is visible. Having a small business loan to cover this can be the next important step in cementing your success in the physical world.
Lack of funding
Without new investment coming into a business can often mean the company will find it hard to grow and expand, even when there is strong demand for its product.
Seeking a small business loan can help ensure the business has the finance to grow, explore new business opportunities or just expand production.
It is often mentioned that more than half of new businesses fail during the first year and while we believe that figure is closer to 30%, it could be substantially less if companies looked at taking out a small business loan at certain timely junctures in their development. With the right amount of planning and funding (and avoiding the mistakes of other businesses), some will always have a better chance of succeeding and being one of the survivors and thrivers.
A small business loan can offer you a source of credit when you most need it. To learn more about our finance packages call us today on 03330 069 141 or request a call back here for a free, no-obligation chat with a member of our team!