No business is immune to financial difficulties from time to time and fortunately, most of the time they are just rough patches on the road to financial success. It’s like going on a journey where the map gets torn in places so you take what you think is an alternate route, only to find you’ve hit a dead end and have to retrace your steps. In steps GPS technology to put you back on the path and before you know it, you’re at the top of the mountain at your final destination. If your business is stuck in that rough patch, here are a few solutions that could be your GPS to business survival.
Sometimes your company is experiencing financial difficulties because of poor cash flow. Your customer accounts may not be current which is backing up all other financial transactions. Other times the problem lies in the fact that you are not bringing in as much as you had anticipated with a new product line or you have made a bad judgment call when investing last year’s profits into a portfolio and now your company is suffering for it. In any event, it is critically necessary to evaluate how you ended up in financial difficulties because this is the root of the problem and if it isn’t fixed going forward, you are on that dead end road with no GPS.
At this point you may need to bring in a financial analyst to help you discover why you are having problems with cash flow. It is well known that those too close to the problem often overlook issues that are staring them in the face. It is hard to be objective when you are facing major financial woes. Your banker may be able to be of help in assessing the issues you are having as might your accountant. If in doubt, call in the pros. Finance is their industry and they will often have the solution you seek.
Does your company have any assets that can be liquidated quickly? Perhaps you have holdings in other ventures you could liquidate or borrow against. Real estate is a great asset so if the company holds titles to any land or structures free and clear, could you borrow against the value of those holdings. Is your company building mortgaged? If not perhaps you could apply for a mortgage.
If it is mortgaged and the principle is less than the valuation of the premises, you could refinance to use the excess money to pull your company up from the brink of failure. Here you will be using the principle of taking debt that is manageable to pay off that which has become unmanageable. Any company assets at all may be the key to procuring the funding you need to tide you over until you are back on a level path forward. You are looking to take that which has become unmanageable and turn it into something you can realistically handle.
One thing many business owners do is re-invest in their own businesses if the company starts experiencing financial difficulties. Do you have personal funds you can invest back into your company? If not, perhaps you have a personal line of credit at your bank or a credit card that offers that feature. The best credit cards carry lower rates and many offer impressive lines of credit to cardholders in good standing.
Unfortunately, even the best credit cards for those with bad credit wouldn’t have this option but they could keep you going at home while you sink all your personal assets and money back into the business. Whether it takes getting a title loan on your car, refinancing your home mortgage or simply borrowing against personal assets, you may wish to consider this option because it is probably the quickest solution. The other really good option is pitching angel investors but this always requires a lot of work and experience.
One thing you may not have done already is to see how your debt is structured. Do you have a lopsided amount of short term debt that could be restructured into long term debt? Paying short term debt with those mortgages is a great way to restructure your debt to give your company time to right itself financially again. In the interest of getting over this rough patch, you may want to do everything in your power to lean heavily on the side of long term so that you can totally get rid of the short term debt that is hindering cash flow.
When it comes to insurance, many people tend to look at those deductibles and worry about how high they will be if an accident or claim against the policy should ever be made. That is an unknown and may never happen. Bear in mind the relationship between deductibles and premiums. High deductibles yield low premiums and vice versa. If you need to free money for a few odd expenses, raising those deductibles may be a possibility.
Speaking of insurance, do you have any whole life policies you could borrow against? These were originally purchased to keep your family going in the event you should ever need to raise funds based on the value of the policy. Your business is also your family’s future insurance so why not borrow against one insurance to keep the other insurance in solid standing? It makes good business sense!
The final, and perhaps the best advice you can ever be given when facing financial difficulties is the old proverb, “Never put off until tomorrow what you can do today.” For a business experiencing financial difficulties this means taking care of financial problems immediately. The longer you let those difficulties ride, the higher they will climb. Remember, it’s a race to the top of that mountain wherein success resides. Who is going to be successful in the end, you or your debt? You can win the race but you need to get a head start. Don’t put that debt on hold. Settle it now or cede the race.