If there’s one thing most small businesses have in common, it’s cash flow problems. Many small businesses start with cash issues right from the start. They don’t have enough to get started. Once they get the capital to start up, they often run into problems keeping the cash flow going. This can cause severe financial issues as well as business problems because it’s hard to grow or even maintain a business when you don’t have cash.
In the ‘State of Small Business Cash Flow’ study, 61% of small businesses claimed a cash flow problem and more than 30% of small businesses couldn’t pay their loans, vendors, their employees or themselves. In fact, 42% of small business owners say they’ve had cash flow problems in the last 12 months.
Women and Men – How do they Borrow Differently?
There’s always a distinct difference between men and women-owned small businesses all the way down to the way they borrow. In a study conducted by Bankroll the following gender differences were found:
- Women borrowed 1/3 less than the loan amounts men borrowed
- Women-owned companies borrowed an average of $48,341 annually
- Almost 20% of women-owned small business loans were in the service industry
- 13% of women borrowing money for small business came from California
- The average loan size for women-owned businesses was 31% less than the average size for male-owned businesses ($70,239)
What Factors Should you Care About?
As you look for the right business loan to stop your cash flow problems, educate yourself on what to look for in the loan.
Obviously, think of the loan amount and how it fixes the issue you face. Are you trying to expand, pay your bills, take advantage of a business opportunity or something else? Make sure your loan amount covers the need.
Next, consider the interest rate, fees, terms, and monthly payment. The interest rate determines what it costs you to borrow the money and you’ll pay it on a monthly basis. The fees are a one-time charge, but increase the cost of borrowing money. The term is how long you have to pay the loan back and the payment amount is what you owe each month.
Look at it from the outside – can you afford the payment? Is the loan worth the total cost after you pay the interest and fees? Do you have any other way to solve the cash flow problem?
Small business loans are a great way to give your business the cash it needs, but only if it makes sense to do so. If you will struggle to make the payments or the cost of the loan is so astronomical that you’ll never get ahead, you may want to look at other options. Do your due diligence and find the loan that suits your needs and your financial abilities the most!