5 Ways Funding (Not Debt) Can Help Your Small Business
If the mere idea of funding prompts a quick “no” …read this article from a small business consultant (Not a lender). We’ll explain the differences between “debt” and the “capital infusion” often necessary to do things differently to create a different outcome, especially in the 2023 economy.
Whispers of “recession” abound these days and we’re seeing more and more small business owners tightening their budgets and even considering closing their businesses. A Silicon Valley mortgage broker and lender has gone from multi millions in previous years’ sales, to only $800,000, a full 90 days into 2023. One partner would rather close the business than “go into debt” despite an amazing proven record in previous years.
Many small business owners feel like they’re walking a tightrope, trying to keep their balance, while staying ahead of the competition. They’re often personally juggling every aspect of their businesses, to “save money.” How can funding help? Overworked, underpaid, unaware of or afraid to invest in resources that can save a business, some already carry personal debt on behalf of their businesses - one of the worst situations to get into. Some small business owners come to us not even paying themselves a salary, working 40-60+ hours for free each week.
Good Debt vs. Bad Debt
When a small business starts spiraling down with the market, many will consider selling or even closing, long before considering a capital infusion and sound investments into their businesses that would spiral revenue back up again. Which business, marketing or advertising or hiring strategies are “sound investments?
As a business consultant, helping small businesses grow into their potential, I spend a lot of time calming the panic and educating the differences between debt, which we don't want for our clients, versus a greatly needed capital infusion required to sustain and grow, well, ANY business from where it is to where it wants to be.. Every business needs working capital to obtain some breathing room, and obtaining it from the beginning, from the business, for the business, helps you build business credit, and helps preserve your personal credit. We want the business to fund its own, start up and growth as much as possible, support itself, and its owner.
Research at Sagework indicates that 77% of small business owners do not apply for loans. A staggering 59% said they used personal savings to start their business(bad debt). The consequence of using your own money, instead of the business, is that if you ever run out of cash flow, and use personal credit cards to keep you afloat, chances are you risk ruining your personal credit score, and jeopardizing your business's ability to get funding when it most needs it.
There is ‘good debt’ and ‘bad debt,’ and there is a HUGE difference between the two. Good debt for small businesses uses borrowed money to pay for items that will contribute to the growth of the business, increase revenue, and the business will pay back the loan, not you! Bad Debt, however, takes money from your own pocket instead of returning money to you and your business such as predatory loans that target people with low credit or income. Giving them few options to consider.
How can funding help your small business?
1. Investing in new customers
Funding your small business with a small business loan can help get your promotional assets you need to bring in more customers. From a Website, Email Marketing, Brochures, and Signage all facilitate getting your business information to your best customer. With increasing prices and inflation, more customers are attracted to lower prices. As small businesses compete while holding prices that support their growth, they find the marketing assets are vital to their success.
2. Increase Your Business Value
Whether you are in the camp of starting a new business or upgrading an existing business, a small business loan can provide equitable support. Entrepreneurs can simulate their idea to get more investor funding, but you must have some skin in the game. Getting your small business growth off to the right start is essential. When bringing in outside funding, such as a business loan, you want to ensure your small business can do more than break even or pay back the debt. Leveraging your loan into a profitable ROI is the name of the game. That is precisely why we offer consulting with every small business and marketing package. For a small business owner, funding can help boost or initiate the growth of your business by hiring a team, buying equipment, marketing, and promoting your brand.
3. Healthy Work Life Balance and Passive Revenue Streams
Hiring, however scary, is critical to achieving a healthy work life balance. Funding small business activities such as hiring, training, and payroll for employees can help you retain skilled labor. As marketing efforts get you more clients, you will need skilled workers to take on the work. Some contracts are only paid once the work is complete. A small business loan will help hire and pay employees before you receive payment for the work.
4.Improving or Expanding your Business
A small business loan can provide you with funding to cover unexpected expenses, renting an office space, investing in equipment for expansion, or stocking up on inventory if you run a product-based business; Floating Large Purchase for Materials, Supplies, and Inventory to be sold.
5. Grow to the Next Level and Develop Passive Income
Business consulting and guiding a business to safely grow to the next level. The biggest pitfall is having money and figuring out what to do with it or how to manage your business budget. With guidance and business-building experience, we offer all the tools for financial stability.
There are many reasons why small businesses need funding. While there are many ways to get funding from venture capitalist, crowdfunding, or small business loans, the growth of the company depends on the systems that the business is following for growth. There are different facets of a business, and consulting will convert your small business loan into business success.