On every main street in America, it seems like most small businesses are thriving. The economy has been favorable for those who are building their dreams. Yet, for some businesses, things have been tough, causing them to get behind financially. Even just paying a few small business loans or other debts late can put a dent in an otherwise good business credit score. And this can set a small business owner up for future failure.According to Funding Circle, “82% of small business failures are caused by poor cash flow management” (US Bank study). So too, business credit scores demonstrate a business owner’s ability to repay debts, which will be taken account of when applying for vendor accounts, business credit cards, interest rates for future loans, and even leasing space for the business.
But what is a small business owner to do if he or she cannot send in small business loan payments on time? Fortunately, there are some solutions that will not put your small business credit at risk.
#1. CALL YOUR FINANCE COMPANY AS SOON AS YOU KNOW YOU MAY BE LATE PAYING YOUR SMALL BUSINESS LOANS.
You may be projecting your cash flow for the month and realize that there won’t be enough money to cover all your small business loans. It’s natural to want to push this aside and hope for the best, but it’s not the best way to manage your business finances. Instead, pick up the phone and call the lender for the small business loan to explain your situation. A few things may happen at this point. You will have the option to ask for an extension of the loan, tacking an extra payment at the end. Or you may be given an extension with an expected automatic payment at a future confirmed date. The lender will also generally hold off on reporting this to the credit bureaus, but you will want to ask if this is possible to protect your business credit score.
#2. SPEED UP AND IMPROVE YOUR BUSINESS RECEIVABLES.
Now can be an opportune time to take a close look at how you are handling your customer receivables too. Investopedia advises several ways to improve your cash flow so you can make on time payments on your small business loans. Run a complete report of your current receivables and make a call to any customers who are late in payment – this is your money sitting in another person’s bank account. Resolve these matters now and explain your new terms. Stop offering credit to new clients; instead require a deposit upfront. Take out a factoring loan against your receivables. You can get money now to pay your small business loans down, and repayment happens once you start collecting past due accounts.
#3. GET QUALIFIED FOR A MERCHANT CASH ADVANCE PROGRAM FOR YOUR BUSINESS.
Chances are, your small business already accepts credit card payments from customers. This can be a good opportunity to get approved for a merchant advance program that puts money in your pocket now. The approval process is easy and is based on your average sales over 3 months. No one will check your business credit and you don’t need references. Repayment of the merchant cash advance doesn’t start until you start taking customer payments and is based on a small percentage of each payment. This can be a great way to pay down your other small business loan payments on time.
#4. TAKE OUT ANOTHER SMALL BUSINESS LOAN.
A company like United Capital Source specializes in providing low interest small business loans with flexible repayment terms. This loan can be used to catch up your other small business loan payments or you can distribute it across all your debts to bring things current again. Business owners can also bankroll the money and use it as needed to never get behind on loan payments again. Instead of other consolidation programs, refinancing, or borrowing money from friends and family—this can be a cost-effective way to manage your small business loans.
#5. MANAGE YOUR WORKING CAPITAL MORE STRATEGICALLY.
It’s up to you to get a handle on what’s causing cash flow issues. Oftentimes, it can be the sign of growing pains that requires a better plan. Some possible solutions can include: increasing pricing for all your clients who typically pay late. Offer a small discount to clients who pay early as an incentive to maintain this practice. Review your inventory and start selling off anything you don’t need or seasonal items at a reduced rate to bring in some extra funds. Eliminate any extra expenses and hidden costs of doing business. For example, your marketing may be costing too much and not giving a positive return.
#6. GET OTHERS TO SUPPORT YOUR FINANCIAL GOALS.
Reach out to your current vendors and suppliers and negotiate better credit terms. Very often, you may be able to reduce your monthly payments in other areas, or pay leased items off early to save money. Consider buying used vs. new equipment. Educate your employees about not wasting time and other business resources. Find ways to bring in more business by partnering with complementary businesses and affiliates. Get in touch with your lender if you are getting behind and ask if there are any programs for shaving the payments down for promoting their services and getting others to sign up.
Most of all, work with a small business loan company that offers flexibility in repayment terms and a wide range of finance options. This can make the difference between maintaining a good business credit score and running into trouble. United Capital Source has been serving small businesses for many years, and we have solutions for anyone facing a shortage of funds to pay an existing loan. There’s no credit check and we have representatives who can guide you through every step of the application and approval process, as well as share more ideas for managing your money better.