“You jump off a cliff and you assemble an airplane on the way down.”
-—Reid Hoffman, LinkedIn co-founder
General Requirements (takes about 5-minutes or less to apply online)
680 FICO score (Transunion or Experian FICO model 8.0 or similar)
Less than -15% operating loss in the last year of business
Last 2-Years of filed Business Tax Returns; Last 1-Year of filed Personal Tax Returns
Last 3-months of bank statements; copy of Driver’s License
Surviving a Cash Flow Crisis: Why a New Business Loan Isn't the Answer and What Truly Works
Sleepless nights, constant worry, and the looming fear of not meeting payroll or paying suppliers are heavy burdens.
In these moments of desperation, the idea of a quick business loan can seem like a life raft in a stormy sea. "If I could just get an injection of cash," you might think, "everything will be okay."
It’s a natural reaction. We’re conditioned to believe that financial gaps are best filled with borrowed money. But I want to share a crucial perspective, born from countless experiences of businesses navigating these treacherous waters: more often than not, a new business loan is a temporary band-aid on a deeper wound, and it can often lead to even greater financial distress down the road
Why simply borrowing more money rarely solves underlying cash flow problems and, most importantly, we'll delve into the sustainable, strategic actions that do work:
1. Deep Operational Adjustments: Reshaping how your business fundamentally manages money coming in and going out.
2. Strategic Adjustments to Financing Activities: Restructuring your existing financial obligations to create breathing room, not adding new burdens.
3. Leveraging and Utilizing Assets: Unlocking the hidden cash within what your business already owns.
This isn't about a magical solution, but about a methodical, clear-eyed approach to diagnosing the real issues and implementing lasting fixes.
It's about empowering you to take control, reduce that crushing stress, and steer your business back towards stability and, eventually, prosperity.
You're not alone in this, and there is a path forward. Let's walk it together.
Understanding the Siren Song of a New Loan
(And Why It's Often a Trap)
When your bank account is shrinking and bills are mounting, the promise of a loan approval can feel like a beacon of hope.
The marketing messages from lenders are often persuasive, highlighting speed and ease.
"Get funded in 24 hours!"
"Solve your cash flow problems today!"
It's a powerful lure, especially when you're feeling the intense pressure of a financial crunch.
Allure of Quick Cash: A Temporary High
The primary appeal of a loan is its immediacy.
It offers the prospect of a lump sum of cash that can, seemingly, make all the urgent problems disappear.
You can pay those overdue supplier invoices, meet payroll, and perhaps even breathe for a moment.
This relief, however, is often short-lived. If the underlying reasons for the negative cash flow haven't been addressed, that new loan money will drain away just as quickly as your previous funds, leaving you back where you started, but now with an additional debt obligation.
Vicious Cycle of Debt: Digging a Deeper Hole
Here’s the hard truth: taking on new debt to cover an existing operational cash shortfall is like trying to douse a fire with gasoline. Consider the mechanics:
● Increased Fixed Costs: Every new loan comes with interest payments and often fees.1 These become new, recurring fixed costs that further strain your already negative cash flow. You're now working harder not just to cover your operational costs, but also to service this new debt.
● Masking Fundamental Issues: A loan can act like a painkiller, dulling the ache of a deeper problem without curing it. If your pricing is too low, your expenses are too high, or your customers are paying too slowly, a loan won’t fix those systemic issues. It merely postpones the day of reckoning and often makes the eventual correction more painful.
● Erosion of Equity and Control: As debt mounts, your business's equity can erode. Furthermore, some loan agreements come with covenants or conditions that can restrict your operational freedom.2
Think of it this way: if a boat is leaking (negative cash flow), bailing water out (making payments) is essential. Taking on a loan can feel like getting a bigger bucket to bail with. But if you don't also plug the leaks (address the root causes of the negative cash flow), you're just bailing faster with a bigger bucket, and you'll tire out even quicker, all while the boat continues to sink.
Good Debt vs. Bad Debt in a Crisis
It’s important to distinguish between different types of debt. "Good debt" is typically incurred by a healthy, stable business to finance growth – purchasing a new piece of equipment that will increase production and revenue, expanding to a new location with proven demand, or investing in a marketing campaign with a clear expected return on investment.3 In these scenarios, the debt is an investment expected to generate more income than its cost.
"Bad debt," especially in a cash flow crisis, is often taken on to cover operating losses or to pay off other debts without a clear plan for how the new loan will improve the fundamental cash generation capacity of the business. If your business isn't generating enough cash to cover its current operational expenses, it's highly unlikely to magically generate enough to cover those plus new loan repayments.
The Crucial Question:
Is This a Temporary or a Systemic Issue?
Before even considering a loan, you must honestly diagnose the nature of your cash flow problem.
● Temporary Blip: Perhaps a major, reliable client had an unexpected, one-time delay in payment, or you faced an unforeseen emergency repair that drained your reserves. If the business is fundamentally sound and profitable, and this is a truly isolated incident with a clear end in sight (e.g., you know that client payment is coming in two weeks), then a very short-term, easily repayable financing option might be a consideration, approached with extreme caution. This could include a line of credit that you can pay back quickly once the expected cash arrives.
● Systemic Issue: This is far more common. Is your negative cash flow a recurring theme? Are you consistently struggling to make ends meet month after month? This indicates a deeper problem with your business model, pricing, expense management, sales cycle, or collections process. Layering new debt onto a systemic issue is a recipe for disaster.
Why Lenders Might Still Offer You a Loan (and Why That Doesn't Mean It's the Right Solution for You)
You might find that some lenders are willing to offer you a loan even when your cash flow is struggling. Why?
● Asset-Based Lending: They might be looking at your business assets (equipment, property, receivables) as collateral. If you default, they can seize and sell these assets to recoup their money.4 This doesn't mean the loan is good for your business's operational health.
● High-Interest Products: Some lenders specialize in higher-risk loans, compensating for that risk with very high interest rates and fees.5 These can quickly become debt traps.
● Focus on Credit Score (Sometimes Misleading): A good personal credit score might get you a loan, but it says nothing about your business's current ability to generate cash to service that loan.
● Sales-Driven Lending: The lender's primary goal is to lend money; that's their business model. Their assessment of risk and your assessment of what's truly good for your business can be very different.
The fact that you can get a loan doesn't mean you should. The critical question is not "Can I get more money?" but "How can I fix the underlying reasons why I don't have enough money?" The following chapters will focus on answering that second, more vital question.
The Real Fix Begins Within: Mastering Operational Adjustments
If new loans are often a detour to deeper trouble, the main highway to recovery runs directly through your business operations. This is where the most significant and sustainable improvements to your cash flow will be found.
It requires a willingness to scrutinize every aspect of how your business earns and spends money. It’s not always easy, but it’s incredibly empowering.
The Power of Cash Flow Forecasting: Your Financial Crystal Ball
You cannot manage what you do not measure. If you're not already doing it, creating and regularly updating a cash flow forecast is the single most important step you can take right now.
It’s less about complex accounting and more about a realistic projection of money coming in and money going out over a specific period (e.g., the next 4, 12, or even 26 weeks).
Pricing Strategies –
Are You Charging What You're Worth?
○ Know Your True Costs: Many businesses underprice because they don't fully account for all direct and indirect costs, plus a necessary profit margin. Conduct a thorough review of your cost of goods sold (COGS) and operating expenses.
○ Strategic Price Increases: Even small, incremental price increases can significantly impact your cash flow and profitability, often with minimal customer resistance if communicated well and justified by value.11
○ Deposits and Upfront Payments: For large orders, custom work, or long-term projects, require a deposit or upfront partial payment. This helps cover your initial costs and improves your cash flow from the outset.
○ Tiered Pricing/Service Levels: Offer different packages or service levels at different price points. This can cater to a wider range of customers and encourage some to opt for higher-margin offerings.
Sales & Marketing Focus – Smart Selling
○ Focus on High-Margin Products/Services: Analyze your offerings. Which ones bring in the most profit and have the best cash flow characteristics? Prioritize selling these.
○ Target Ideal Customers: Identify customer segments that not only value your offerings but also have a good track record of paying on time.
○ Promotions to Clear Old Inventory (Strategically): If you have cash tied up in slow-moving stock, well-planned promotions or sales can convert that inventory back into cash. Be careful not to devalue your brand or set expectations for constant discounts.
○ Retain Existing Customers: It's usually cheaper to keep a good customer than to acquire a new one. Excellent service leads to repeat business and reliable revenue streams.
Controlling Cash Outflows:
Spending Smarter, Not Just Less
Just as important as bringing cash in is controlling how it goes out. This isn't just about slashing expenses; it's about smart, strategic spending.
● Expense Audit – A Line-by-Line Inquisition
○ Needs vs. Wants: Go through every single business expense. Categorize them as absolutely essential (needs) versus nice-to-have (wants). In a cash flow crisis, the "wants" must be critically evaluated and likely cut or deferred.
○ Identify "Subscription Creep": Review all recurring payments – software subscriptions, memberships, services.14 Are you using all of them to their full potential? Are there cheaper alternatives? Cancel what you don't truly need.
○ Negotiate with Suppliers: Don't be afraid to talk to your suppliers.
■ Can you get better pricing for bulk orders (if you can manage the inventory and it makes financial sense)?
■ Can you negotiate longer payment terms (e.g., Net 60 instead of Net 30) to improve your cash flow cycle?
■ Explore alternative suppliers who may offer more competitive pricing or terms. Loyalty is good, but not at the expense of your business's survival.
○ Reduce Discretionary Spending: Travel, entertainment, elaborate marketing initiatives – these may need to be curtailed or eliminated temporarily.
● Inventory Management – Cash on Shelves
○ Dangers of Overstocking: Excess inventory ties up huge amounts of cash that could be used elsewhere.15 It also incurs storage costs, insurance, and the risk of damage, obsolescence, or spoilage.16
○ Just-in-Time (JIT) Principles (If Applicable): For some businesses, adopting a JIT approach – ordering materials and producing goods only as needed to meet customer orders – can dramatically reduce inventory holding costs and improve cash flow.17 This requires reliable suppliers and efficient production processes.
○ Optimize Stock Levels Based on Sales Data: Use your sales history and forecasts to determine optimal inventory levels for each product. Avoid guessing.
○ Clearance Sales for Slow-Moving or Obsolete Stock: Be aggressive in turning dead stock back into cash, even if it means selling at a lower margin or cost. Some cash is better than no cash tied up in unsellable goods.
● Managing Payroll Costs
○ Payroll is often one of the largest expenses.18 This is a sensitive area, but one that must be examined.
○ Optimize Staff Schedules: Ensure staffing levels match workload demands. Are you overstaffed during slow periods?
○ Cross-Training Employees: Versatile employees can cover multiple roles, providing flexibility and potentially reducing the need for additional hires or temporary staff.19
○ Hiring Freeze: Temporarily halt new hires unless absolutely critical for revenue generation or essential operations.
○ Freelance or Contract Help vs. Full-Time Hires: For specific projects or temporary needs, using freelancers or contractors can be more cost-effective than hiring permanent employees, avoiding long-term salary and benefit commitments.
○ Discuss Reduced Hours/Pay (As a Last Resort): If the situation is dire, transparent conversations with your team about temporary reductions in hours or pay, with a clear plan for reinstatement, might be considered to avoid layoffs. This requires immense trust and careful handling.
○ Layoffs: This is the most difficult decision, but sometimes necessary for the survival of the business and the jobs of the remaining employees. If it comes to this, handle it with compassion, respect, and adherence to all legal requirements.
● Delaying Non-Essential CapEX
That new piece of equipment, the office renovation, the vehicle upgrade – if it's not absolutely critical for generating revenue or maintaining current essential operations right now, postpone it. Preserve cash for operational needs.
Making these operational adjustments takes diligence, discipline, and sometimes tough choices. But the result is a more resilient, efficient business with a healthier cash flow, reducing your stress and your reliance on external funding to survive.
General Requirements (takes about 5-minutes or less to apply online)
680 FICO score (Transunion or Experian FICO model 8.0 or similar)
Less than -15% operating loss in the last year of business
Last 2-Years of filed Business Tax Returns; Last 1-Year of filed Personal Tax Returns
Last 3-months of bank statements; copy of Driver’s License
Smart Financing Adjustments (No New Bad Debt)
Once you’ve committed to rigorous operational adjustments, the next area to address is your existing financial landscape.
The goal here is not to take on new debt to plug operational gaps, but to intelligently manage and restructure the obligations you already have to ease the immediate pressure on your cash flow.
This is about creating breathing room so your operational changes have time to take effect.
Focus on Existing Debt First:
The Primary Objective
If you're struggling with negative cash flow, adding new loan payments on top of your current ones is rarely sustainable. Instead, the priority should be to reduce the immediate burden of servicing your existing debt. Even small reductions in monthly payments can make a significant difference when cash is tight.
Open Communication with Current Lenders:
Transparency is Key
It might feel counterintuitive, especially when you're stressed and perhaps embarrassed about your financial situation, but one of the most constructive steps you can take is to proactively communicate with your current lenders (banks, credit unions, alternative lenders, etc.).
● Don't Hide: Lenders dislike surprises more than they dislike problems. If they see you're avoiding them or payments suddenly stop without explanation, they will assume the worst and may be less willing to work with you.
● Be Proactive and Honest: Schedule a meeting or call before you miss a payment. Explain the challenges your business is facing. Be transparent about the reasons for the downturn and, crucially, what you are doing about it.
● The Power of a Well-Prepared Plan: Don't just show up with problems; show up with solutions. Present your cash flow forecast. Detail the operational adjustments you've made or are in the process of making . Show them you have a credible plan to improve the situation. This demonstrates responsibility and increases their confidence in your ability to eventually meet your obligations. Lenders are more likely to be flexible with a borrower who is actively and intelligently working to fix the problem.
Debt Restructuring Options:
Creating Breathing Room
When you talk to your lenders, you can explore several restructuring options:
● Term Extensions:
○ What it is: The lender agrees to extend the repayment period of your existing loan. For example, if you have three years left on a loan, they might extend it to five years.
○ Impact: This lowers your monthly payment because the outstanding principal is spread over more installments.
○ Caveat: While it provides immediate cash flow relief, you will likely pay more interest over the life of the loan. However, surviving the current crisis is the priority.
● Interest-Only Periods:
○ What it is: For a defined period (e.g., 3-12 months), the lender agrees to let you pay only the interest on the loan, with no principal repayment.
○ Impact: This can significantly reduce your monthly payment in the short term, freeing up considerable cash.
○ Caveat: The principal amount of the loan remains unchanged during this period, so you're not reducing the overall debt. Once the interest-only period ends, your payments will either revert to the previous amount or might even be slightly higher to catch up on the principal. Ensure you have a plan for when full payments resume.
● Payment Deferrals/Forbearance:
○ What it is: The lender agrees to temporarily pause your loan payments altogether for a short period.
○ Impact: This provides maximum immediate cash flow relief.
○ Caveat: Interest typically continues to accrue during the deferral period and is added to the loan balance, meaning you'll owe more in the long run.21 This is usually a very short-term solution for acute crises.
● Debt Consolidation (Approach with Extreme Caution and Specific Intent):
○ What it is: This involves taking out one new loan to pay off multiple existing debts, ideally with more favorable terms.
○ When it might make sense (and align with our "no new bad debt" principle):
1. If you have multiple high-interest debts (e.g., credit cards, short-term expensive loans).
2. If you can consolidate them into a single loan with a lower overall interest rate AND/OR a longer repayment term that significantly reduces your total monthly debt payment.
3. The primary purpose is to make existing debt more manageable from a cash flow perspective, NOT to secure extra cash for operations.
○ The Trap: Be wary of consolidation loans that just kick the can down the road without improving your terms or those that come with hefty fees that negate the benefits. It must demonstrably ease your monthly cash outflow burden. If you've addressed operational issues, this can be a sensible part of cleaning up your balance sheet.
Negotiating with Other Creditors
(Beyond Lenders)
Your lenders aren't the only ones you owe money to. Proactive communication can also help with other creditors:
● Suppliers: Many businesses operate on trade credit (e.g., Net 30 terms). If you're facing a crunch:
○ Talk to your key suppliers. If you've been a good customer, they may be willing to temporarily extend your payment terms (e.g., to Net 45 or Net 60).
○ You might offer to make partial payments to show good faith.
○ Maintaining open communication can prevent them from cutting off your supplies, which would be catastrophic.
● Landlords: If rent is a significant expense:
○ Discuss your situation with your landlord. Especially if you've been a reliable tenant, they might consider a temporary rent reduction, a payment plan for arrears, or a deferral of a portion of the rent.
○ They often prefer a good tenant working through a temporary issue over an empty property.
● Tax Authorities: If you're struggling to meet tax obligations (like sales tax, payroll taxes, or income tax installments), contact the relevant tax agency immediately. They often have programs for businesses facing hardship and may be willing to arrange a payment plan. Ignoring tax debts can lead to severe penalties, interest, and aggressive collection actions.
The Importance of a Realistic Repayment Plan
Whether you're talking to lenders, suppliers, or the tax office, your requests for flexibility will be much better received if they are accompanied by a clear, realistic plan.
This plan should be rooted in your cash flow forecast and the operational changes you're implementing.
Show them how and when you expect to get back on track.
This isn't about making wild promises; it's about demonstrating that you have a thoughtful strategy for recovery.
Restructuring your existing financial obligations is about creating stability.
By reducing immediate outflows, you give your business the vital breathing space needed for your operational improvements to bear fruit and for cash flow to turn positive again.
Unlocking Hidden Cash: Leveraging Assets
Your business likely owns more than just the cash in its bank account. These assets, from equipment to inventory to outstanding customer invoices, represent stored value. In a cash flow crisis, strategically utilizing or, in some cases, liquidating these assets can provide crucial injections of cash without resorting to new, burdensome loans.
What Are Your Business Assets?
A Quick Inventory
Take a moment to list out the significant assets your business owns. These can often be overlooked as immediate cash sources:
● Equipment: Machinery, tools, vehicles, office technology (computers, printers).
● Inventory: Raw materials, work-in-progress, finished goods.24 (We touched on managing inventory for outflow reduction, but here we focus on its potential for quick cash generation through sales).
● Real Estate: If your business owns its premises (office, factory, warehouse, land).
● Accounts Receivable: The money owed to you by customers for goods or services already delivered.
● Intellectual Property (IP): Patents, trademarks, copyrights.25 (While harder to quickly monetize for many small businesses, it's worth noting for some).
● Investments: Any stocks, bonds, or other financial instruments held by the business.
The goal is to identify assets that are either underutilized, non-essential to your core current operations, or can be converted to cash more efficiently.
Selling Underutilized or Non-Essential Assets: The Business "Garage Sale"
Many businesses accumulate assets over time that are no longer critical or are used infrequently.
● The "Garage Sale" Mentality: Walk through your premises. Is there equipment sitting idle in a corner? Old vehicles that are rarely used? Surplus office furniture?
● Identifying Candidates:
○ Obsolete or Outdated Equipment: Technology or machinery that has been replaced but not disposed of.
○ Surplus to Requirements: Perhaps you downsized operations or changed processes, leaving some equipment redundant.
○ Non-Core Assets: Assets not directly contributing to your primary revenue-generating activities.
● Avenues for Selling:
○ Online Marketplaces: eBay, industry-specific forums, Craigslist, Facebook Marketplace.
○ Auctions: Local or online auction houses specializing in business equipment.
○ Industry Contacts: Other businesses in your sector might be interested.
○ Scrap Dealers: For very old or broken metallic equipment, scrap value might be an option.
● Benefit: This brings in immediate cash for assets that were otherwise just taking up space or depreciating further. The cash is yours, debt-free.
Sale-Leaseback Agreements:
Cash Now, Use Continues
This is a more complex transaction but can be effective for businesses with valuable, essential equipment or real estate.
● How it Works:
1. You sell an asset (e.g., a key piece of machinery or your business premises) to a finance company or investor.
2. You receive a lump sum of cash from the sale.
3. You then immediately lease that same asset back from the buyer, allowing you to continue using it in your operations.
● Benefits:
○ Significant Cash Injection: Can unlock a substantial amount of capital tied up in fixed assets.
○ Continued Use of Asset: No disruption to operations if the asset is critical.
● Considerations and Downsides:
○ Loss of Ownership: You no longer own the asset.
○ Lease Payments: You now have ongoing lease payments, which become a new fixed expense.26 Ensure these are manageable within your improved cash flow projections.
○ Cost: Over the long term, leasing is often more expensive than owning.27 However, immediate survival and cash flow improvement are the current priorities.
○ Contract Terms: Carefully review the lease terms, including duration, payment amounts, buyout options at the end of the lease, and maintenance responsibilities.28
A sale-leaseback should be considered if the immediate cash injection will solve a significant short-term problem and allow the business to reach a more stable footing where it can comfortably afford the lease payments.
Liquidating Excess or Slow-Moving Inventory: Turn Stock into Cash
As discussed in operational adjustments, inventory ties up cash.29 If you have significant capital locked in slow-moving, obsolete, or excess stock, it’s time for decisive action to convert it into liquid funds.
● Aggressive Sales Strategies:
○ Deep Discounts: Don't be afraid to mark down prices significantly to move this stock. Some revenue is better than it gathering dust.
○ Bundle Deals: Combine slow-moving items with popular ones.
○ Clearance Events: Online or in-person.
○ Flash Sales: Limited-time offers to create urgency.30
● Selling to Jobbers or Liquidators:
○ These companies specialize in buying bulk discounted inventory.
○ You will likely get a lower price per unit than selling directly to consumers or other businesses.
○ However, they offer quick payment and can take large quantities off your hands rapidly, providing a fast cash infusion and freeing up storage space.
Leveraging Accounts Receivable
(Beyond Standard Collections)
While diligent collection is key, if you have substantial amounts tied up in reliable receivables and need cash immediately, invoice financing or factoring can be revisited here (with the same cautions as mentioned in Chapter 2).
● Factoring: You sell your invoices to a factoring company at a discount. They give you an advance (typically 70-90% of the invoice value) and then collect the full amount from your customer, paying you the remainder minus their fees.
● Invoice Discounting: You borrow money against your outstanding invoices, with the invoices serving as collateral.31 You are still responsible for collecting from your customers.
● Crucial Note: These options come at a cost (fees and discount rates can be high). They are generally more expensive than traditional bank financing. They should be used sparingly and strategically when the immediate need for cash outweighs the cost, and you have a clear plan to move away from reliance on them as your operational cash flow improves.
Using Personal Assets (The Absolute Last Resort – Proceed with Caution and Professional Advice)
Sometimes, in dire situations, business owners consider using personal assets to inject cash into their business. This might include:
● A home equity loan or line of credit (HELOC).
● Personal savings or investments.
● Loans from friends or family.
This path is fraught with significant personal risk and should only be considered as an absolute last resort after all other business-focused operational, financing restructuring, and asset utilization strategies have been exhausted or deemed insufficient.
● Blurring Lines: It blurs the critical line between personal and business finances. If the business ultimately fails, you risk losing personal assets like your home.
● Increased Personal Stress: Adds another layer of personal financial pressure.
● Legal and Tax Implications: There can be complex legal and tax consequences.
If you are even contemplating this, it is imperative to seek advice from a qualified financial advisor AND a legal professional. They can help you understand the full ramifications and explore if there are any less risky alternatives remaining. This is not a decision to be made lightly or in a panic.
By thoughtfully examining your business assets, you can often uncover sources of cash that don't involve taking on new debt. This approach, combined with operational improvements and smart management of existing liabilities, forms a much stronger foundation for recovery than a quick loan ever could.
Moving Forward: Navigating with Resilience
Dealing with negative cash flow is undeniably one of the most stressful experiences a small business owner can face. It's more than just numbers on a spreadsheet; it's about your livelihood, your employees' security, and the dream you've worked so hard to build. The emotional toll – anxiety, fear, frustration, and even shame – is real and significant.
Acknowledge the Emotional Toll, But Don't Let It Paralyze You
It's perfectly normal to feel overwhelmed. Allow yourself to acknowledge these feelings. However, it's crucial not to let them lead to paralysis or denial. Stress can cloud judgment and make it harder to see a clear path forward.32 The strategies outlined in the previous chapters require a clear head and decisive action.
● Practice Self-Care (Even When It Feels Impossible): Ensure you're getting enough sleep, eating reasonably well, and finding small moments for breaks or exercise. Your well-being is critical to your ability to lead your business through this crisis.
● Focus on What You Can Control: You can't control the wider economy or unforeseen events, but you can control your response, your operational decisions, your communication with stakeholders, and your commitment to implementing a recovery plan.
The Power of Small Wins: Building Momentum
Tackling a major cash flow problem can feel like trying to move a mountain. Instead of being daunted by the overall challenge, break it down into smaller, manageable steps.
● Set Achievable Daily or Weekly Goals: For instance: "This week, I will create a 4-week cash flow forecast," or "Today, I will call three overdue customers," or "By Friday, I will identify three non-essential expenses to cut."
● Celebrate Progress: Each small win – a successful negotiation with a supplier, collecting an overdue invoice, identifying a cost saving – builds momentum and confidence.33 It proves that you are making a difference.
Seek Advice and Support
Trying to solve everything by yourself, especially when under immense stress, can be inefficient and isolating. Leverage the expertise and support of others:
● Accountants (Especially those with Cash Flow Expertise): A good accountant is more than just a tax preparer. They can help you create accurate cash flow forecasts, analyze your financial statements to identify problem areas, advise on cost-cutting measures, and assist in negotiations with lenders or tax authorities.34 Look for one who acts as a strategic advisor.
● Business Mentors or Coaches: An experienced mentor or coach can provide an objective perspective, share insights from their own experiences, act as a sounding board, and help you stay accountable to your recovery plan.35 They can offer both practical advice and emotional support.
● Small Business Development Centers (SBDCs) and Similar Organizations: In the United States, SBDCs (often affiliated with the Small Business Administration - SBA) offer free or low-cost counseling, training, and resources for small businesses.36 Similar organizations exist in other countries. They can provide expert advice on financial management, operational efficiency, and recovery strategies.37
● Industry Associations: Your industry association may offer resources, forums, or connections with peers who have navigated similar challenges.38
● Trusted Peers: Confiding in a trusted fellow business owner can provide camaraderie and practical tips. Just ensure you're sharing with someone who is constructive and supportive.
● Legal Counsel: For matters like debt restructuring, asset sales (especially real estate or sale-leasebacks), or potential insolvency issues, consulting with a lawyer experienced in business law is crucial to protect your interests.
Develop a Plan:
Preventing Future Crises
Once you navigate through the immediate crisis and your cash flow stabilizes, the work isn't over. The final step is to build resilience to prevent this from happening again, or at least to mitigate its impact.
● Build a Cash Reserve (Business Emergency Fund): Aim to gradually build up a cash reserve that can cover 3-6 months of essential operating expenses.39 This provides a buffer against unexpected downturns or large, unforeseen costs.
● Continue Rigorous Cash Flow Management: Don't abandon your cash flow forecasting and regular financial reviews once things improve. Make it an ingrained part of your business rhythm.
● Regularly Review Pricing and Costs: Don't let your pricing become outdated or your costs creep up unnoticed. Schedule periodic reviews.
● Diversify Customer Base (If Possible): Over-reliance on one or two major customers can be risky if they suddenly have payment issues or take their business elsewhere.40
● Maintain Good Relationships with Lenders and Suppliers: Continue open communication even when things are good. This builds goodwill that can be invaluable if you face future challenges.
● Scenario Planning: Think about potential risks to your business (economic downturn, loss of a key supplier, new competitor) and brainstorm how you might respond.
A Final Word of Encouragement:
You Can Navigate This
The journey out of a negative cash flow situation is a marathon, not a sprint. It requires courage to face the problems head-on, discipline to make tough operational changes, and persistence to see them through. The allure of a quick loan as an easy fix is strong, but as we've explored, it often leads to a deeper quagmire.
Instead, by focusing on strengthening your operations, strategically managing your existing financial commitments, and intelligently leveraging your assets, you are building a truly sustainable path to recovery.
The stress you're feeling now is immense, but by taking these deliberate, informed actions, you are taking back control. You are not just patching a hole; you are rebuilding your ship to be stronger and more seaworthy than before. Believe in your ability to turn things around.
The path is challenging, but with focused effort and the right strategies, you and your business can emerge from this storm.
General Requirements (takes about 5-minutes or less to apply online)
680 FICO score (Transunion or Experian FICO model 8.0 or similar)
Less than -15% operating loss in the last year of business
Last 2-Years of filed Business Tax Returns; Last 1-Year of filed Personal Tax Returns
Last 3-months of bank statements; copy of Driver’s License
We can help you Navigate through the Small Business Financing maze.
The sooner you act, the more options you’ll have.
Schedule a consultation today and take the first step toward saving your business and your future.
Remember, more business debt isn’t the answer. A more effective business strategy is.
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Bernarsky Advisors
Business Finance and Strategy Advice
Refinance. Restructure. Reorganize.
(See more of our articles about Business Finance and Strategy below…)
WHAT IS THE BEST AND SAFEST WAY FOR YOUR BUSINESS TO DEAL WITH HIGH BUSINESS DEBT PAYMENTS?
It is NOT by stopping ACH payments.
It is NOT by taking on another business loan.
It is NOT ALWAYS a Refinancing
It is NOT by entering into a debt settlement program.
Find out the BEST strategies to get your Business back to where it was
Setup a meeting with a business finance & strategy expert to discuss all of your options!
Read some other recent Business Finance and Business Strategy articles:
