The COVID-19 pandemic sent shockwaves throughout the world and according to the Haltiwanger’s analysis, 2020 showcased an exemplary number of new business formations. The surge in new business applications was uneven across all sectors but the largest increase settled on the non-retail sector. Namely, eCommerce.
In the United States, there were approximately 380 out of every 100,000 adults in the country who became entrepreneurs every month. And according to Salesforce, more than half of new businesses start off with less than USD$10,000 in funding and nearly half of those started their new businesses with less than USD$5,000.
Businesses Without Proper Funding Will Flounder
Every new business will need a form of funding source, especially during the beginning stages. Otherwise, it will fall into a weight of debt if it does not take off immediately upon its launch. Depending on the solvency of the business owners, the business plan, its promotions, and uptake on what the company offers, it takes time to maintain itself through months and years. Otherwise, it would just be a one-hit-wonder or a no-hit disaster.
Seed Money
Everything you need to start your business with requires money. Raw materials, office supplies, a website, business cards, and even travelling…it all costs money and it needs to come from somewhere. The small business funding either has to come from the business owner’s personal savings, a bank loan, or from an investor.
Seed money or seed funding or seed capital is a form of initial capital raised by a startup company during its early stages. Seed money sources may come from professional investors, venture capitalists, angel investors, accredited investors, business incubators, or crowdfunding campaigns.
If there is an individual investor who contributes the most to the initial working capital, he or she will get a say in future decision-making processes in the company. So, as a new company, you may want to do a little bit of research into the individual before deciding to cooperate with them. It’s important that you and the investor have similar goals and views.
Cash Flow Concerns
You may get the business started and launched with a small capital investment but once the business is running, you will need to think about drawing a salary, paying your employees, paying utilities, buying up insurance, and a whole lot of other laundry list of stuff to pay for. Not many businesses make a profit right off the bat and face cash flow problems several months down the road.
Depending on how much you want to expand your business, you may need to consider several options where financing is concerned. The usual options would be for traditional banks to offer small business loans, lines of credit, or corporate credit cards with special rates to startups and small businesses.
If you’re proposing your business plan to potential investors, bear in mind that you will need to know your business model inside out in order to convince them. You will need to convince them with a plan for a healthy cash flow.
Plans for Expansions
Startups and small businesses grow at different rates but some may outgrow its current location or if there is a sudden rise in demand for a particular product or service. This could be a sign that you may need to consider business funding to meet the new demands.
In fact, before a small business can expand or launch/promote new products or services, funds will need to go into product research and marketing strategies. Additional manpower may also be needed and this can be financed with new business funding solutions.
Maintenance and Repairs
Including all the regular maintenance works that need to be done to your office or business assets, accidents happen. It could be fire, flood, tornado, hurricane, or even political unease. In recent years…an unexpected pandemic outbreak.
Accidents happen and it CAN rock your bottom line.
Your insurance would cover most of the repairs due to these unforeseen circumstances but you need enough financial buffer to pay salaries while repair and maintenance is ongoing. On a smaller scale, old machines or equipment could unexpectedly need replacement or to be upgraded.
Instead of being caught off guard, a business line of credit with a special rate and repayment scheme could really come in handy.
Additional Equipment or Business Assets
There may come a time when you will need additional funding to acquire new equipment or real estate in order to grow your business. It could be anything from adding new team members to your staff to renovating your existing retail outlets to upgrading your app or website. All these require cash.
They are inevitable if you want to grow your business and remain competitive. Difficult times can come any time and this could result in tight cash flow problems. If your business is centred around continuity, growth, and increasing revenue, these setbacks can be offset by small business financing in order for your business to reach set goals.
Wise usage of business term loans or invoice financing can help you reduce outstanding customer invoices and other maintenance costs.
Before You Go…
INFT offers competitive rates for our business term loans that can help you tide over tough times or grow your business. If you are an SME in Malaysia and are looking for a short-term business loan in order to scale your business, feel free to contact us at +6018-7928328 or email us at cs@inft.com.my
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