Government programs, new approaches to financing and bartering with suppliers can help small businesses succeed this year.
Last year was brutal for small businesses, and 2010 promises to be only marginally better. We’ll have to live with “survival as the new success” for a while longer – so here are 10 tips on how to make it through the lean times.
Take advantage of government programs. While small-business owners are often rightly cynical about the government being here to help, the bailout era does include something for everyone. The stimulus package is still pouring money into construction projects. The Small Business Administration has sweetened its loan programs. Investment-incentive schemes such as the obscure New Market Tax Credits program are steering money to certain areas and industries. And make sure your accountant is on top of the numerous, new tax breaks available to small companies.
Think creatively about financing. Bank lending is not going to get much more liberal this year, but there are some alternatives. Consider using a factor or some other form of inventory financing if you’re in that type of business. Peer-to-peer lending via the Internet is starting to take off, and can be a smart option for small sums if you have a good credit rating. Foundation grants are also a possibility for some types of projects, though the process can be very time-consuming. In general, credit-card companies won’t be easier than banks, but some of them offer deferred payment plans that can help with cash-flow issues.
Manage your payables and receivables aggressively. The best way to maintain good cash-flow is to collect quickly and pay slowly. A combination of carrots (a small discount on the bill) and sticks (high interest rates on outstanding balances and a quick cut-off of credit) can help bring cash in the door more quickly. On the flip side, try negotiating longer payment terms with your vendors. They may not like it but they could be eager enough to keep the business that they’ll work with you.
Negotiate your rent. The commercial real-estate business is in a terrible state, and that can be a good thing for tenants. If you’re paying 2005 rents, you should be able to cut your bill—either by relocating or by threatening to do so.
Use barter. Trading for goods and services is more trouble than it’s worth in good times, but when things are tight it’s worth taking another look. If you own your business outright, consider trading for personal services (the dentist, the gymnastics class for the kids) that you would be spending money on anyway.