Working Capital Management Survival Guide

Working Capital Management Survival Guide

by

Stephen Bush

Due to the increasing failure of banks to provide an adequate level of commercial funding, the strategies described in this article should be considered by most business borrowers in the initial stages of their commercial financing efforts rather than as a last resort. This article is designed to provide a practical starting point for a commercial finance survival guide, and finding effective guidance for obtaining small business finance help is likely to be a high priority for most business owners.

The necessity for small business owners to adopt aggressive tactics has been created by an ongoing failure of banks to provide adequate business financing options. An important goal for any small business owner is clearly surviving the current business finance crisis. This article will illustrate the importance for small business owners doing whatever it takes to survive in a tough commercial lending climate. For many commercial borrowers, the option of firing their lender has not yet become apparent. In adopting an aggressive business loan approach that is increasingly essential for business owners impacted by widespread banking chaos, it is unlikely that their banker is up to the task anymore and therefore commercial borrowers should be prepared to look out for their own financial interests. One of the most predictive signs that a commercial borrower might need to fire their lender is when their commercial banker is unable to finalize the business financing which was initially discussed or offered. The use of innovative financing tactics means that some small business loan options which borrowers previously ruled out because they were too costly or complicated might deserve another look to survive in an erratic lending climate. A key example of a commercial financing strategy which has probably been a Plan B for many small businesses but not their eventual choice for acquiring more working capital is a merchant cash advance program (also referred to as merchant financing and business credit card advances). With a sudden reduction in business lines of credit and an increased requirement for collateral by many commercial lenders, the use of credit card processing to obtain working capital now has more practical appeal for the typical small business owner who needs more cash for their daily operations. A high priority for any commercial borrower is distinguishing the good banks from the bad banks. An ability to provide required commercial financing options is perhaps the most practical gauge for a small business owner to define whether a bank is good or bad. There are multiple reports confirming that most banks are no longer offering a normal level of business funding. It is reasonable to conclude that if a bank is not providing commercial loans as usual, it certainly might be because they do not have sufficient financial resources for small business lending. On the only scorecard that matters to most business owners, the few good banks will gradually become obvious based on their documented small business lending activities. In the meantime, business owners should expect to need some professional help in finding these few remaining good banks. A lack of sufficient information can lead to devastating consequences as is often the case in many activities which are guided by technical aspects. Using a a business consultant who is a small business loan expert is a practical way for business owners to overcome a substantial information gap. The current business lending climate is likely to be discouraging for inexperienced borrowers when evaluating banks which are not functioning normally or are providing only complicated (and expensive) small business financing programs. Finding pragmatic solutions can be facilitated by business consultant experienced in the ways of overcoming commercial lending problems. An essential element in surviving the commercial financing crisis is likely to be locating new and reliable business lending sources. But in addition to considering new lending sources, new small business finance strategies should be reviewed. There are several other business finance choices which should be evaluated by business borrowers before arranging their commercial loans (in addition to the aggressive financing strategies already discussed). Receivables factoring is a key example. Difficulty in matching the timing of income with expenses is routinely experienced by many successful businesses. Arranging a business line of credit with a bank was previously how many businesses handled this kind of situation. Receivables financing has emerged as a primary commercial finance tool for many businesses because commercial lines of credit are rapidly disappearing as a realistic alternative. Small business owners will need to take the initiative to explore and analyze business financing options which can effectively replace current bank financing.

Stephen Bush is a

small business finance

expert and has provided candid advice to business owners for more than 25 years. AEX Commercial Financing Group supplies small business financing and

working capital management

programs

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