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August 10, 2008

What If you can't get a small business loan?

It's getting harder to find a bank that will advance you a small business loan, especially in the current credit climate.

So what are your alternatives?

Re-mortgaging your home is perhaps out of the question, it's far too risky, besides you'll be lucky to get a bank to even consider your load application. Family and friends can't help either because they are feeling the pinch as well. So what can you do?

Assuming your business is up and running here are just a few tips on how to squeeze and manage cash flow through the credit crunch. It all boils down to prudent planning.

1. Prepare a cash flow statement and review it often, daily if possible. Determine what you can or should spend now and defer non critical expenditure until you can meet the expense. Use cash flow software to automate the process as much as possible.

2. Before you agree a new customer do a credit check to make sure they are not a credit risk. The last thing you want is to lose cash due to bad debts.

3. Keep good bookkeeping records. Instead of storing up receipts and invoices to hand to your bookkeeper or accountant once a year for tax and accounts preparation, keep track of your expenses. In fact you cannot manage cash flow unless you keep track of cash receipts and cash payments.

4. Perform daily bank reconciliation

5. Talk to your bank, suppliers and customers regularly. Maintain good relations during the good and bad times. Surveys show that maintaining good relations with your bank and suppliers in beneficial when events take a turn for the worst, for example when your business faces a crisis and you need all the help to recover from the situation.

Once your business starts to expand you may seek capital from angel investors or venture capital.

The following article on small business finance has some useful tips once your business is ready to move up a notch or two.

Note: I see so many businesses making the mistake of not producing a cash flow statement and reconciling their bank statement to their cash book. During this credit crunch cash is d king. I hope you find the above tips useful and that you’ll apply them to your business if you are not already carrying them out.

Posted by David at August 10, 2008 9:59 PM

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