Access to a steady cash flow is a must for any business. Without an adequate supply of capital, a business cannot pay its employees or conduct the basic tenants of business. With so many banks either yanking or severely restricting the credit lines of businesses across the country, the issue of maintaining an adequate cash flow has become dire for many.
Contrary to the reports of mainstream media, many banks argue that capital is still available to credit worthy businesses. And, if you are looking to tap into that capital, you will need to take a few important steps including:
- Determining your credit worthiness before applying for a loan. Avoid allowing your cash or liquidity position to diminish. This has an immediate negative effect on your credit reporting history and acts as a big red flag for banks.
- Reevaluating your business plan and ensuring it is strong and current. It is imperative to show that you have a realistic plan for the future as well as a plan to repay any monies borrowed.
- Plan for the worst. Lenders require that you provide a minimum of twelve months of financial projects laid out in a monthly format. The projections need to take into account three possible scenarios: the best, mid- and worst case scenarios. Forecasting prepares you to think strategically and helps lenders feel more comfortable in your ability to repay the loan regardless of the circumstances that may impact your business.
- Preparing a two year business look back. This shows lenders that you are financially strong and are not a fly-by-night operation.
- Taking control. Given the harsh economic environment, now is not the time to step back and turn over the control of your business to others (or to crawl into the fetal position and cry, tempting as it may be). You are ultimately responsible for the success of your business; therefore, if you need to pick up the phone or visit customers who are slow in paying their bills, then do it. Take a closer look at your products and/or services and determine if they are appropriate for the current marketplace, and as difficult as it may be, reevaluate your labor needs. Think long and hard on the decisions you make. Do not have a knee jerk reaction and begin cutting back wildly. Surprisingly, eliminating some expenses can often cause more harm than good.
There is money out there available to businesses, but it will take research and preparation to access it. Draw on whatever resources are available to you including your local banker, SBA and SCORE organizations. As cliché as it sounds, it’s important to leave no stone unturned.