A new study finds cash flow a major issue for SMBs

According to a recent Mercator report titled The Cash Flow Conundrum, of 2,000 small and medium-sized businesses (SMBs) in the U.S. surveyed for the study, cash flow is one of the primary concerns that keep SMB owners up at night.

In 2018, only about 4 in 10 SMBs reported that daily cash flow was an extreme concern. That finding increased to 55% by 2020. The unexpected outbreak of the COVID-19 pandemic fueled the increase at least in part.

It takes a significant financial investment to turn your great business idea into a reality, and you need subsequent investments to keep your business afloat. What do you do when your funds run short?

Even the most profitable business can struggle because of poor cash flow. According to the report, 70% of tech-savvy SMBs have cash flow concerns, and COVID-19 has negatively impacted 65% of these merchants' cash flow.

Businesses such as restaurants, bars, beauty salons, auto repair shops, liquor stores, catering companies, and retail stores often face a similar challenge. They tend to be family-owned or standalone companies that may not have the significant financial resources of large franchises.

Many customers choose to frequent such businesses just for that fact alone, but what happens when loyal clients aren't enough? Would you like to remodel to attract a new clientele? Maybe it's something as simple as having new menus designed or upgrading your old dishwasher? If your business is experiencing a cash flow problem, it's essential to take steps that will either increase cash flow or decrease overhead costs (or preferably both).

Lack Of Cash Flow Affects Routine Business Purchases.

Thirty-seven percent of the merchants surveyed for the report said once or twice a year their routine purchases were affected, 30% said this happened 3-4 times a year, and 8% were affected nearly every month. Only 4% stated they experienced delays in routine purchases due to cash flow concerns more than once a month.

Cash flow problems can arise when a business has net cash outflow due to expensive purchases or timing of certain payments such as debt or large inventory buys. Sometimes seasonality can play a factor; expenses are constant; however, revenues temporarily drop, creating net cash outflows.

Don't be tempted to cut back on certain expenses, such as advertising, to fix the problem. Advertising is key to growing your business. Today, there are many free or inexpensive advertising mediums at your disposal, such as Facebook and Twitter. However, you may also find it important to stick to tried and true advertising methods, such as purchasing ad space and paying for a custom marketing strategy. Consider a mix of both where you try something new and perhaps also trim costs.

Solving the cash flow conundrum can be difficult with traditional sources. Banks are reluctant to make loans to SMBs, and the process can be complicated, with long applications, financial statements, income tax returns, and required collateral.

Alternative business funding does exist in the form of a merchant cash advance. The process allows for fast financing for business owners, freeing them to invest in revenue-building activities that increase cash flow. A merchant cash advance works by agreeing to repay the provider a percentage of future income. Unlike traditional loans, businesses would not be responsible for making regular, fixed payments. Instead, the provider collects a set percentage of the company's daily credit card or debit card sales. The repayment itself is flexible, and it rises or falls depending on card sales transactions. When sales are strong, the merchant will pay more. When sales are slow, the merchant will pay less. Merchant cash advance companies fund several billion dollars per year to small business owners.

If your business could use a cash infusion, take comfort in knowing that a merchant cash advance can be your solution to an increase in sales and profit.

Quikstone Capital Solutions is a business funding leader. For more than fifteen years, Quikstone has helped 10,000 SMBs with hundreds of millions of dollars in working capital to grow their businesses. Business funding from Quikstone is easy, fast, and flexible. With an A+ rating from the BBB, 80% of our merchants are repeat customers, and we're proud of that. To learn more, contact us today for a free, no-obligation pre-qualification.