5 Signs Your Business Needs Funding to Survive Lean Periods

Countless small businesses across the country provide valuable services and products with an attention to detail and loyalty to the customer that you just can’t find with other companies. 

While we normally characterise these businesses by quality customer service and the ability to provide niche products and services to our local communities, they can also be characterised by a lack of capital. Having the financial means to successfully own and operate a small business is crucial to growing and sustaining your company into something you’re truly proud of. But now, as you move forward, you realise that you may need additional business funding. Maybe to expand and grow your business or just to survive lean periods. Whatever the reason, the signs are out there, and you can’t just ignore the fact that you need more funding. 

1. Poor cash flow management

Cash in king no matter what type of business you operate. So, in order to thrive as a business, you must practically manage your cash flow. That sounds right, isn’t it? Unfortunately, that’s a common issue for many businesses. Due to their nature, some companies have to spend more cash than is available while also enduring a negative cash flow because of poor planning. That’s usually the case for companies that have to stock up on their inventory at specific periods during the year. Others have to endure negative cash flow issues simply because they experience seasonal fluctuations. That’s often the case for businesses that are busier during a specific time of year. 

Whatever the reason, poor cash management can impact a business heavily, and this should be a top-of-mind concern. Your cash flow indicates the viability of your business, so you can guess what that means in the eyes of the stakeholders. To escape this uncertainty, you can require a business loan to assist you in properly managing your cash flow, especially during your expansion periods.

2. You need to expand but don’t have enough financial backing

Why would you ask for more capital when your income is higher than ever before? 

Well, as your small business starts to flourish, you need to expand your operations by relocating your business or enlarging your existing space. However, since moving and real estate costs tend to reach new heights, you may need a small business loan to expand your business in a similar way to taking out a mortgage loan to purchase a property. 

Maybe you need to expand your team and looking for top talent is one of your main priorities for the next few weeks or even months, but you lack the funding to do so. Or you’ve found that your equipment is too outdated to meet the demand of your staff and customers. If that’s the case, then these additional small business funds can be used to finance these manpower or equipment expansion. 

Speaking of expansion, this can mean different things to different businesses. Some specific development projects may be: 

• Renovating an existing space 
• New commercial space/additional business location 
• Offering new services or products 
• Advertising 
• Expanding marketing strategies 
• Hiring more staff 

Seeking business funding is a wise choice to back expansion projects because these projects can either fail or serve as a driving factor in your growth plans. We suggest you be smart and plan your funding wisely. 

3. To increase your inventory and meet demands

This is definitely one of the biggest expenses for a business- no matter the industry. This is particularly relevant for seasonal businesses or during slower seasons where business loans in Canada for equipment could be the best option.  

However, if you’re launching a new product, you’re anticipating an influx of new customers, or you’ve picked up a large customer, you may very well need a small business loan to create the inventory necessary to meet these orders. Getting your hands on a business loan during lean periods would allow you to purchase the inventory necessary and get your business through the season. 

4. Unexpected expenses and a too-thin cash cushion

We can say right from the start that a successful business is one that is great at planning. As part of your planning strategies, you should consider cushioning for risks. Some suggest that as a business owner, you should endeavour to preserve as much cash flow as possible. You can do that by cushioning at least six months’ worth of operating expenses. This is a great idea because, as we’ve previously mentioned, businesses should take a couple of steps to try and cushion the blow in the hard economic times. These lean periods can either be due to a global pandemic or due to harsh cyclical changes and processes. No matter the case, it’s a smart move to have a cushion. 

Other reasons that preserving cash will help you include planning for a financial crisis, expanding your business or shopping for bargains.  

5. You’re an innovator, and you need cash to fuel your idea

To stay on top of your competition, it’s clear that you have to be innovative. With the latest technological advancements, that concept is more prevalent. But as a small business owner, you have to be a savvy competitor in a marketplace full of larger businesses. 

As part of your expansion process, you may be at a point when innovation needs to wait. That can be due to financial issues, research of development delays, or lack of technology to create new services and products. 

Since you may be at a point where innovation is an absolute must for the growth of your business, you’re done with the waiting game. If that’s the case, then this may be a good time to seek additional financial backing. 

Alas, we’ve outlined five key signs, so you will know when you should look for funding during your growth process. If these signs apply to your enterprise, make sure you review additional funding options and start planning as soon as possible.