We discussed two distinct factors that reflect if your business is sale-ready in the part-1 of the three-series blog. We’ve also seen that selling a business per se is never going to be easy due to several factors coming into play. Many consider lack of funds or investment as the killer reason for businesses not able to scale as expected, and therefore getting your business “sale ready is delayed. That is why we thought this lack of financial capability must be given more attention, as several factors are intertwined ranging from a low or negative credit score, banks and other traditional financial sources refusing to lend loans and negative cash flow from financing activities. If you’re a business owner, it is important to understand the root cause of lack of financial capability, and how to raise investments from alternative funding sources, besides arranging working capital loans.
How lack of funding can hurt your business?
Any business rests heavily on its ability to make sales, get paid from customers and meet obligations so as to top up its inventories, grow and expand it. Within this core function, there are a lot of factors, which, within all by themselves, can threaten the ability of your business to meet future obligations as well as leading to its failure.
A majority of businesses today undergo a vicious cycle of slow or delayed payment and this affects the entire business sales cycle. Result: businesses winding up with a precarious cash flow situation that becomes unsustainable over time due to their customers who are either slow payers or customers out of sync with the billing cycle (with respect to either the start or end of the payment period). Having at least 6-8 months of cash flow available to you in order to fund those gaps is imperative for businesses in the long run. And when they lack the muscle to access funding resources, including those channelized through banks, businesses take a back seat, and for all the obvious reasons.
Financing options for making business sale-ready
One of the best options to finance your business is availing of working capital loans that work under terms that are flexible to you and your mode of business. These loans factor in various aspects including the time needed to collect your outstanding bills, the size and status of your accounts receivable, current liabilities and the funding required to operate your business. Taking these factors into account can put you in good stead with a loan to meet your short-term financial needs of normally up to 90 days.