2020 has been a rough year for everyone, especially business owners. Thousands of businesses across the country have slowed down or even closed in an effort to stay afloat. Unfortunately, as 2021 begins, the economic outlook is still flat.
How can you manage through the storm?
Before you make it to the second quarter, you first have to weather the continuing storm. Since Q1 is predicted to stay flat, you have to stay viable, while at the same time getting ready to capitalize on the growth that is predicted to happen later on. The good news is that there are several options you can try. These options include:
Payroll Protection Act Round II. The second round of the PPP is now available to businesses that qualify. While the PPP focuses primarily on retaining employees by paying salaries and hourly wages, it can help you leverage those paid hours to capitalize on your team’s knowledge, skill and ability to see and act on opportunities. You can also keep production moving to remain ready to provide products and services.
Invoice or contract factoring. While the PPP doesn’t pay for everything, you can leverage contracts and invoices for some ready cash. Selling your invoices to a factoring company can help bring in working capital, while also positioning your company to hit the ground running in Q2 without extra entanglements and open accounts bringing you down.
Working capital loans. When cash is tight, you need an open line that helps you with your short-term, day-to-day financing. This is where a working loan comes into play. Knowing there are better times ahead is great, but you have to be able to get there, first!
Asset based lending. If your business has been successful up until now, chances are you have assets that you can use to help secure loans. Yes, this can be a little risky, but at times you have to take some chances to get to the light at the end of the tunnel.
What Happens in Q2?
Thankfully, economic forecasters predict a significant upswing in activity once we make it out of Q1. As the economy picks up, businesses will need funds to meet orders and customer demand. Again, there are several options to choose from that can help you meet your customer’s growing needs. These options include:
Hard money loans. If you are looking to secure some cash quickly, one way to do this is with a hard money loan. These can be risky because it involves putting real estate or other owned assets down as collateral, but they are also a quick way to secure a loan, as real estate is always an easy sell.
Business line of credit. Of course, rather than just getting one big shot of capital, it can also be helpful (and sometimes wiser) to only access the funds you need, when you need them. A line of credit lets you do just that, preventing you from borrowing more than you need.
Refinancing old debt with new rates and terms. Most likely, to make it through 2020 your business had to take out some loans or come up with other creative ways to raise cash. Now, you are looking at more debt than ever and wondering how to afford it. One smart move is to refinance your debt with lower rates. Refinancing not only helps you pay it down faster but also frees up more money every month by reducing your monthly payments.
Sale leaseback. If your company has valuable funds stored up in equipment, facilities or real estate, one move is to perform a sale leaseback. A leaseback means you sell the assets, but then lease them back from the buyer. You still get to use the assets, but the income from the sale not only gives your company a much-needed boost, but it comes in the form of a sale that does not need to be paid back.
Equipment financing. If you are not afraid to spend money to make money, as the saying goes, one way to get ready for the second half of 2021 is to finance more equipment. More equipment means a possible increase in production or service capacity, which leads to more sales down the road. While it might seem like a scary move at the time, financing more equipment can be a long-term investment that pays dividends later on.
Small Business Administration loans. One final possibility is a loan from the SBA. Before you get a regular loan from a lender, consider SBA loans. Often, you can get loans with reduced interest and friendlier terms. In short, it always makes sense to try and get the best loan possible, every time.
As you start thinking about 2021 and what all of us have in store, it is important to think about all of the possible solutions you have at your disposal. While you consider the forecasts, why not contact us so you can work with our loan brokers. We can help you identify the best lenders and the right terms to you to make 2021 the best year ever.