Small Business Cash Flow
SMALL BUSINESSES — whether just starting up or in the heights of success — face common challenges while managing risk. Success or failure is determined by how the business owner responds. And that’s a challenge itself as many new owners are coming from non-business backgrounds, learning as they go.
More than 400,000 small businesses are started every year. And fewer than half survive past the five-year mark, the typical benchmark of success for small businesses, according to the Small Business Administration, or SBA. Following a dip during the Great Recession, small business loans have seen a 63.9 percent jump over the past 5 years, according to the SBA.
The Small Business Administration has seen this boom with individuals seeking SBA loans in areas such as online businesses, food services and small business manufacturing. “Over the past two years, we’ve seen such an uptick that we’ve approached our cap for loans that Congress had set for us and had to request an increase,” says Miguel Ayala, spokesman for the Small Business Administration.One of the biggest challenges for new and established business owners is cash flow management. And it often starts rearing its head when a business opens. Money is going out, but not necessarily coming in at the same rate.
Challenge 1: Cash Flow Management
MANY PEOPLE just want to start a business but don’t think of all the pieces that accompany it. Planning ahead can help offset many of the initial cash flow problems small businesses face. While most new owners allot for about three to four months of costs, some recommend at least six months so there’s a cushion in place. Others advise businesses to make sure they have a plan in place, one that covers all possible scenarios — good and bad.
Source: New York Times
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