If you’re a small business owner or work for one that hasn’t been a slam dunk right out of the gate (as most small businesses are not) then you know how stressful it can become when the financial strain seems to be choking any future potential the company could have with its product or service. In these instances, many people make the naïve mistake of thinking a small business loan will solve their problems.
Not unlike the way many unwed couples think getting married will solve their relationship issues, and not unlike couples who think having a baby will solve their marriage issues, getting a bank loan for a small business could take a garden variety difficult situation and turn it into a far more serious situation—and even the situation that could cause you to have to close the doors of your storefront.
So with all this discussion about how getting a loan could actually be the last thing you need, what is the answer? In many cases, fixing what’s wrong with a small to medium sized business has nothing to do with cash flow—what’s happening inside the business is what could be costing so much money that the profit margins begin to suffer.
To get a small business out of debt or into a place where it is at least profiting and beginning to show signs of getting out of the red, other management steps or changes in how operations are being handled may very likely be the key to getting on track.
It’s easy to understand why so many new business owners or those who are veterans begin to freak out when month after month, sales are down, overhead is up, and friction between partners or the staff is enough to make you want to fire everyone and shudder the doors. But if you feel this way as a business owner, what does this really say about the issues that lay beneath the cash flow problem?
And further, how will a new loan with new monthly payments which is financed at a percentage you may not be able to handle every month help make you more financially grounded? It won’t. The money from the loan will likely be a patch up for the real problems. Not unlike the way painkillers take away the pain but do nothing to heal the body, a small business loan can mask the real issues, and in this way, keep you from truly being able to diagnose your company’s true ailment.
Get your house in order: balance the books, even when it scares you to death. Running away from what the numbers really look like will not solve the financial problems you face, which will worsen when you forget to pay another bill and/or have to pay employees late (they really do hate that.)
Survey the scene: if everyone is fighting all the time and the business is a mess, has disorganized inventory and customers screaming through the phone lines and writing emails in all caps, money isn’t your issue—management, organization, and most likely poorly constructed job descriptions are.
If you really feel a loan will solve the problem: get some outside counsel from other businesses in your community and if available, some pro bono counsel from a local small business lender to see what they think about the problems you’re having and how much of them are related to money.
As someone very wise once said, money only solves money related issues. It can’t fix a marriage, a broken childhood, and in many cases, it cannot be the long-term resolution for your business. There is a very high chance that once you have put that new loan to what you thought was good use, you’ll find yourself in the same predicament six months or a year down the line—but now, you’ll be paying a loan off while still trying to save your business from going under.
