Expect the Unexpected: Preparing for Surprises with Access to Capital

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Regardless of the business you’re in, it pays to be prepared for unexpected expenses. While some surprises are less expensive than others, there are times when having access to extra capital can mean the difference between keeping your business moving forward or making do without.

A rainy-day fund is a good place to start. How much you should save to cover emergency expenses is largely determined by the nature of the business you’re in, but setting aside some of your profits every month to cover unexpected expenses down the road is just a good idea.

A short-term online business loan might also be an option to access capital quickly to cover an unexpected expense. Online business lenders are often able to offer approvals in a matter of minutes and have funds deposited in a business checking account in as little as 24 hours, making it possible to access capital quickly to address an emergency expense.

For many business owners, a line of credit is another good option. Unlike a typical small business loan, a line of credit provides access to a fixed amount of capital that a business owner can use when needed, pay off, and use again. What’s more, interest is only paid on the amount of credit the business owner uses. (Traditional lenders, like banks, and online lenders offer business lines of credit).

Not all businesses are the same, but here are some of the events you could face over the next 12 months that might require a little extra cash:

  • Equipment breakdown: If your business has equipment or machinery that’s critical to your operations, having access to the capital you need to either fix or replace it could be critical to your ability to do business.
  • An unexpected opportunity: Not every surprise is a problem. Sometimes an unexpected chance to buy inventory, or timesaving equipment, at a substantial discount could create a need for extra capital to take advantage of the opportunity.
  • A new contract: It’s not uncommon for new contracts to require extra capital to pay for ramping up—whether that be hiring new personnel, adding a new production line, or both.
  • An expansion opportunity: A tenant leaving the property next door could provide an opportunity to expand a retail space or add seating to a restaurant. Unexpected opportunities to expand could require a little extra capital to take advantage of the surprise situation.
  • Electrical problems, plumbing issues, or other similar inconveniences: Older buildings often have plumbing and electrical issues—it’s not uncommon for a major plumbing or electrical repair to cost several thousand dollars.
  • A marketing campaign: Many businesses need extra capital to launch a new product or marketing campaign.
  • Growing pains: As businesses grow, they sometimes need extra capital to purchase new supplies, ramp up a new employee, or maybe even purchase new desks and office equipment. While most business owners are anxious to see their businesses grow and prosper, sometimes that growth can be expensive in the short term.

Regardless of whether you decide to create a rainy-day fund or finance unexpected expenses, the time for preparation is before the need arises. And if your business regularly requires funds to cover short-term cash flow needs, a business line of credit—in addition to your rainy-day fund—can be a good idea to cover gaps in your cash flow.

The time to prepare for the unexpected is now. And a good place to start is by understanding your business credit profile and taking action today to strengthen or improve it so that when you do need to access funds, the process will be simple and straightforward.

2017-12-20T10:28:32-07:00 September 1st, 2015|Categories: Ongoing Management and Protection|Tags: , |

About the Author:

Ty Kiisel
Ty Kiisel is a contributing author at BusinessLoans.com, a new resource full of content addressing all aspects of business financing for small business owners. Ty has over 25 years of experience in the trenches of small business, and provides personal anecdotes and valuable tips to help small business owners become more financially responsible.

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