When your small business starts to accumulate uncontrollable debt, then you know you have to do something to remove that debt as a going concern. Here are some steps you can take right now that can mean the difference between staying open and closing for good.
Investigate Alternative Financing
Asset-based lending (ABL) allows you to use current assets in order to secure vital capital. ABL includes inventory financing, receivables factoring and purchase order financing. If you have inventory of valuable finished goods, then you can use it as collateral against a cash advance. Your customer’s unpaid invoices also have a value, as do any current purchase orders you’ve received. Take the time to go outside conventional financing and look inside your small business for those assets you can use to get cash right now.
Speak to Vendors, Creditors and Customers
Your vendors and customers can help you narrow the gap between your payables and your receivables. If you’ve been a loyal customer for several years, a specialist from Faber Inc recommends asking your vendors to temporarily offer you extended payment options. Outline your plan on how you’ll move forward during this difficult time. Ask your creditors to amalgamate your debt into a single loan with a longer repayment period. Finally, incentivize customers to prepay for purchases. You can offer discounts, rebates and or reduced pricing on some of your inventory as a means of securing upfront payment.
Return to Profitability
You know you have to cut costs, but by how much? Well, there are two main trains of thought regarding cost cutting in urgent times. The first claims that you cut costs gradually in order to maintain service capabilities. However, the other train of thought says those cuts should be so deep and so drastic that you immediately return to profitability. If you can return to profitability by making severe cuts, then do so immediately. If you are not able to do this, then make just enough cuts that they don’t affect your ability to service your customers.
Outsource Resources and Expertise
Some small businesses solve their short-term debt problems by leasing or renting out existing warehouse space, office space and or office equipment. Some even resort to bartering services for cash. Take the time to review what you have at this moment that can be used to secure the working capital you need to keep your doors open.
You don’t have to accept your current situation. However, you must have the follow-through capabilities to enact these aforementioned strategies. The longer you wait, the harder it will be to get out of your current situation. Define what you have available that can be used to secure cash and move forward on your plan.