Starting your own small business is an exciting endeavour and Toronto is a great city to start a business or become self-employed. Regardless of how good the city’s business climate is for new businesses, do expect a lot of challenges ahead, especially of the financial kind. For instance, you might find yourself in a situation where your small business is running out of money. The first thing to remember is not to panic. It’s perfectly normal for a new business or a freelance career to run out of cash. Here’s what you can do about it so that you can continue normal business operations:
Borrow the Money You Need
The first and easiest option when your small business is running out of money is to quickly borrow some money to keep your business operating. There are multiple options for fast loans in Canada that businesses or self-employed persons can consider. These loans would add debt to your existing entity, but this debt would be the lifeline that saves your venture so you can profit in the future.
Borrowing money in times of need can be tricky. Banks may refuse to extend credit if your revenue numbers aren’t solid. Some lenders, on the other hand, may require collateral. Don’t exclude options for unsecured loans available to both companies and individuals. You don’t have to offer collateral for these loans, but the interest rate on the loan will probably be higher. It might be a worthy trade-off to save your business in case of a financial emergency.
Cut Down on Operating Costs
The most important thing to do when your company is facing financial trouble is to run operations as frugally as possible. Now is the time to cut down on operating costs. Some decisions will be hard, but necessary. For example, you may have to let go of some of your staff.
Other items to eliminate include luxury or entertainment expenses or any items that are not part of the core business plan. Experts recommend cutting at least one-quarter of existing operational costs to survive. Do what you can to stay afloat without hurting core operations.
Negotiate with Creditors
You may also run into existing debt difficulties when your company is running out of money. You can’t repay your lenders when there’s no revenue from your business. This is the scariest situation for most business owners. There is a way out of mounting debt in this scenario: simply talk to your lenders.
You can renegotiate debt with your creditors. Keep in mind that lenders would prefer that your business doesn’t go bankrupt so that their loans get paid. At the very least, you should be able to get a credit extension.
Diversify or Merge
When your company is running out of cash quickly, it’s time to rethink the business plan. If one avenue of revenue isn’t working, it might be time to diversify. Most of the largest companies in the world diversify when growth hits a plateau. If your small business revenue has already slowed down, it’s time to diversify and find a secondary source of income.
Don’t rule out merging either. It might be possible to merge with another, typically foreign, company. Getting absorbed into a bigger company means your debts get paid off by someone else. This type of situation ensures financial stability and survival in the worst-case scenario.
There are many options to consider when your small business is running out of money so don’t be disheartened. Apply one of the options listed above to ensure your business survives long enough to experience growth and profits.
You might also be interested in reading, “Tips for Choosing the Best Small Business Insurance“.