SMALL businesses are in the market for more and larger loans in the current economic climate, amid increasing fears of a brand-new recession.
The UK economy contracted by 0.3% in Q2 against the backdrop of multiple challenges, from the war in Ukraine and fallout from coronavirus to record energy price cap hikes.
During the same period, Iwoca found that 46% of brokers had submitted more applications for small business financing, as companies look to fund growth and consolidation during difficult times.
But what are the key considerations when planning your business’s finances? Let’s get into it
Create a Concise Financial Plan
Your first step should be to create a detailed and concise financial plan, which provides an outline of your business’s fiscal status.
This should be broad and include various components, including balance sheets, income statements, and cash flow information. This is done to ensure that you have a comprehensive overview of your venture, including its incomings, the value of its assets, and working capital.
This should also include a so-called “break-even” analysis and sales forecast, which enable you to determine the point at which your business starts to become profitable (or loss-making) and project quarterly or annual sales going forward respectively.
This information can impact every stage and facet of your business forecasting while enabling you to make more informed decisions about borrowing over time.
The Importance of Getting an Expert’s Opinion
The notion of making more informed decisions making is crucial for all businesses, particularly when it comes to deciding whether to take out loans or business funding at a fixed rate of interest.
After all, such agreements incorporate debt into your business model, while increasingly monthly outgoings and squeezing margins further over time.
At the same time, the process of creating a detailed financial plan for your business may highlight areas of expense that are either excessive or erroneous. Similarly, the analysis of your balance sheet could reveal ownership of assets that are no longer required by the venture, creating a scenario where you could subsequently sell these to raise cash and improve your company’s finances without taking on debt.
Regardless of these various merits and benefits, it’s arguably worth seeking out an expert’s opinion in this field. Certainly, there are financial and investment service providers that specialise in organising and monetising your commercial assets in a way that helps with the accomplishment of short, medium, and long-term fiscal goals.
Such service providers can also provide investment services on an advisory or discretionary basis, depending on your precise business model, level of financial experience, and how you like to operate as an entrepreneur.
This enables you to create an accurate and bespoke financial plan to sustain your company’s growth during challenging times, without incurring significant debt levels and while maximising your core assets.
