How to Deal With Financial Challenges Faced By Small Business

Businesses take a lot of initiative and planning to start and maintaining it requires a great deal of effort. As blood is for the body, finances are for Business, right inflow and outflow can keep the accounts in check and make the business protected from market changes.

Small Business Financial Challenges and How to Overcome Them

Small Business Financial Challenges


Finances are stated to be one of the reasons for the rise and fall of the business and, small businesses are more prone to financial crunches, and a small business loan might help in maintaining the accounts.

Every business needs finances to run, and for growth, expansion and loss recovery, you might have to be extra cautious in making a financial decision. For running a successful money flow, you need to make the right decisions and come out with the best solution for financial challenges.

As per the statistics, India has 51 Million small and medium business that employ nearly 120 million people and contributes to 37% of the GDP of the country. With such a large workforce in place, there are many challenges faces by the business owners and taking a right financial decision is one of them.

Financial security and availability is a concern for almost every small business and the government, and other financial bodies have been supporting the business owners in providing the credit with a minimum barrier.

Ease in the policies of government and initiatives taken by Central bank has made the credit approval process accessible and approachable.

Below Table will help to understand which type of loan is required by you for your business needs.

Type of LoanPurposeRate of InterestTenureSecurity
Working Capital LoanCarrying out daily transactionsUsually higher than the term loanUp to 1 YearUnsecured
Term LoanExpansion, Loss Recovery, PaymentsLower than the working capital loansCan be up to 15 yearsSecured

Check the following financial challenges faced by the business owners and how to tackle them:

1] Lack of Capital

Money Makes Money is a famous quote and applies to every business. Whether you are thinking to expand the business or install new machinery or enter a new segment, you will need capital to invest.

Depending upon the amount of capital needed, you can apply for small business loans. There are many financial institutions that have come up,and every bank is ready to inject capital in the business. You can apply for either working capital loan or term loan, based upon the need of your business.

2] Cash Flow Management

Credit cycles in business are not easy to manage and can create a struggle for you to carry out the daily transactions. As per a survey, nearly 33% of business owners stated cash flow as a challenge.

You have to work on getting the invoices paid on time and create a healthy and balanced credit cycle with a short period of payment. Once you have managed the cycle, you will see a managed cash flow.

You can also think about getting a working capital loan from a bank which will help you in maintaining the transactions in a flow.

3] Financial Foresting

Though it is a complete study which helps major business in taking the financial decision as a small business owner, it is easy for you to gauge the expenses for a quarter.

It can also help you in adjusting according to the changing needs of the market and will help you to keep a check on the availability of the funds to complete the deals without barriers.

4] Avoiding Frequent Expenses

Make a note of your expenses and check where are you spending the most on your business and what are the causes of those frequent spending. If you can control the frequent unnecessary expenses, you can put that capital to the right use.

5] Maintaining Emergency Fund

Recurring business expenses are manageable and easy to understand,but unpredictable expenses can have a huge blow on your finances.

There might some machine failure, equipment damage,and urgent repairs, such expenses have to be taken into consideration. You need to make sure you have a percentage of your fund always available for such ad-hoc requirements.

Whether you are running a business for a long time or you have just entered the market, finances can be a challenge for anyone,but with the planning and management, you can control the cash flow and make sure you have the capital to meet your daily expenses successfully.

You can always go for a small business loan which can help you maintain your working capital and long term business plans.

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About the author

Michael Austin

Michael Austin is a Internet Entrepreneur, Blogger, Day Dreamer, Business Guy, Fitness Freak and Digital Marketing Specialist. He also helps companies to grow their online businesses.