Four key financial challenges for business owners – and how to overcome them » SMEInsider

Four key financial challenges for business owners – and how to overcome them

Rob Straathof, CEO of Liberis, looks at some of the financial challenges
facing business owners and how to overcome them

You’ll know all too well the steep financial demands of running a business in a difficult environment, especially where getting finance can be difficult.

We speak to our customers regularly about what gives them cause for concern and have pulled together some tips on how to overcome some of the key challenges so you can grow your business.

Do the following sound familiar? Finding cash; managing a healthy cash flow; coping with a poor credit rating and financial underperformance. So how can you ensure that your business overcomes them and grows stronger?
We believe if you know the potential hazards upfront, your business will be better prepared to withstand any financial shocks, so here’s our view of steering through the fog of the small business challenges!


Getting a cash injection

Ambitious business owners need to be savvy about leveraging various means of small business financing. When a great opportunity comes along to expand to a new store or increase your product range, you may be frustrated by a lack of availability of business loans. Even with government initiatives in place, small business growth is still being choked by sluggish bank lending.

cash money

However, there are an increasing number of alternative finance options available. If you have assets (usually property) against which you can borrow, asset-based funding could work well. There’s also crowd funding, where large numbers of individuals contribute a small amount of capital, or peer-to-peer lending where investors lend to many businesses at once, thus enabling the business to borrow from many different people, accepting the lowest interest rate offer.

For unsecured business lending with flexible payback in-line with cash flow, a business cash advance may provide the answer.

How it works is that you receive a cash injection that is repaid based on a set percentage of the business’s future credit/debit card receipts until the full payback amount is reached. In short, the money is paid back only as the business earns. It’s also very quick, requiring only a simple application process so you don’t miss out on any business opportunities.


Keeping the cash flow positive

Stock, salaries and rent can be the main drains on cash flow. They flow relentlessly out of your bank account each month and it’s your job to ensure that your cash income at least covers your outgoings. That’s why it’s so important to have a regular cash flow forecast rather than merely prepare one when you start up.


You can buy accounting cash flow software that makes monitoring your cash flow and taking action much easier. For example, if you predict a downturn in four months’ time, you can try to negotiate better terms with your suppliers, reduce stock or arrange a short-term cash boost by borrowing from family or putting a business cash advance in place that can be repaid as quickly as you want.

Turning a poor credit rating around

Many young, and small, companies don’t have a great credit rating. Estimates are that almost 70% of small businesses carry an ‘above normal’ risk that may well prevent them from getting the finance they want.

credit score 2
Many individuals and small businesses are unaware of their credit ratings so the first step is to get a report on your personal and business ratings. If things look bad, you can improve the situation by:

  • Paying suppliers within their specified invoice terms
  • Paying loans and other obligations by direct debit
  • Filing within deadline with Companies House (if you run a limited company)
  • Reducing, wherever possible, the ratio of borrowings to assets – too high a figure may reduce your company’s credit score
  • Ensuring that your working capital – ie, current assets compared with current liabilities – is positive.

Guarding against under-performance

Financial under-performance doesn’t just relate to how much income or profit a business is generating; it’s also important to have organised financial systems in place. Retailers have the benefit of customers who pay immediately, so you can track your cash, debit and credit card sales when they hit your bank account. Do you keep your books up to date?


If you do need additional finance in the future to grow, you will need a reasonable level of financial information, plus it’s good business practice and will help flag up any financial problems more quickly.

Rob Straathof is CEO of Liberis

This article originally appeared on Liberis’ website