5 Financial Challenges Startups Face and Smart Ways to Tackle Them

Launching a business is a bold decision and you should be prepared for the unexpected exposure to manifold financial issues. You have to sail through a problem now and then for the ultimate survival. Even despite having preparations, at times, you will find that the cash flow is totally mismanaged.

Do not dare to overlook small cash challenges! They have the potential to impact major financial decisions related to the growth of your company. Some financial blunders can be so deadly that they can derail your project from the route to success.

Feeling demotivated to start a venture because of the cash challenges you might encounter? Relax! These are going to be part and parcel of your entrepreneurial journey. Handling them is possible in various ways as every business goes through them.

You are not going to be the first entrepreneur to face cash problems while running a business. Evaluate the situation you get into before trying a solution for this. Do not skip this step or else you will end up implementing the wrong strategy to tackle a specific problem.

This blog is going to discuss some of the common areas where a business struggles financially. Have a look at it.

Overcoming financial obstacles that start-ups encounter

This entrepreneurship journey will take a you through mixed emotions. At one point, you might feel highly pumped up after some of the basic feats. The next moment, you might be thrashed with an uninvited problem that make you question the survival of the business.

You cannot prevent financial issues from cropping up. However, you can formulate some strategies to combat them. One of the very basic step to get started with is creation of a safety net i.e. emergency fund.

The biggest advantage of having this provision in place is that you can begin the damage control process without any delay. Thus, the primary step can be started meanwhile you find the best way to escape. Find the secondary ways you can try out with respect to the financial problem your business is facing.

1.     Unplanned cash crunch

In business, maintaining the cash flow is crucial. At times, the amount of money going out exceeds the amount that is coming in. In this situation, a funding gap is created and you might need an instant solution to it.

For speedy and easy funding, you can get start-up business loans with no guarantor even. This financing option is to cater to any short-term necessity of the business. Thus, no security or a guarantor is necessary.

Any trivial requirement can be settled with the help of these loans. Make sure that your business can generate the desired revenue to make up for the repayment amount. Otherwise, you will invite a never-ending debt problem and your business will have to bear the financial pain for a long.

2.     Not getting timely payment from clients

Money is the ultimate fuel that helps in running the business. If the cash comes in is not what you are supposed to receive at this time, it triggers a problem. This mostly happen when the clients delay to clear off your payments within the deadline.

Because of this delay, you will not be able to pay the vendor or supplier on time. Thus, you cannot get the raw materials necessary to start the next batch of production. This will ultimately affect the amount of profit your business can make.

Create a payment agreement where the client should get some discount on the cost by paying off some amount in advance. Besides, you should be alert to follow up the payment process. From time to time, send timely reminders to them so that they do not forget the dates.

3.     Cash flow not being regular

This is one such issue that is the reason behind your headache. You cannot have a permanent solution to it. However, the best thing you can try is keeping monitoring the cash flow from time to time.

It is crucial to validate that cash flow is positive. This means your business is making enough money which is more than what it needs to spend. On the other hand, a negative cash flow should be alarming.

Things start to take a negative turn from this point. The cash flow being volatile makes it tough for you to manage regular payouts. You might not even have necessary funds to handle the operational costs.

In this situation, you should try to cut cost to save money from internal funds. You can check if you can downsize some portion of the overhead cost. You must constantly strive to keep the cash flow right in shape.

4.     Excessive money spent on marketing

Out of excitement, many new businesses might just focus on the marketing aspect too much. They allocate a big chunk of the funds to sponsor the fees for advertisement. It is true that you must think of ways to popularise your business.

However, it does not mean your prime focus from the beginning would be to market your business only. You must pay attention to building the foundation of your business. At the same time, you must focus on how strengthening the production.

Now, when you spend most of the money on marketing, you must not have enough money left to carry out the necessary operations. You might have to pay the suppliers to keep up with the production.

Thus, when you are just initiating the business building process, you must aim for organic ways to market it. This way, you do not have to shell out a lot of money. Take advantage of the reach of social media to grab the attention of your target audience.

Spend time on understanding the strategies that might work wonders to improve the reach of your business.

5.     Not keeping personal and business funds separate

Oftentimes, you will come across a situation when you cannot differentiate your personal and business finances. However, this type of situations should be avoided by creating separate accounts for the business transactions.

Then, you will be able to keep track of the financial progress of your business. Moreover, your personal funds will not get mixed up and spent.

The bottom line

Being stuck in a situation where your business needs an immediate dose of cash, it is difficult to finalise the best option. To clear up the doubts, you can consult a business finance broker. They are intermediaries who are supposed to have a good rapport with lenders.

In fact, you can have a better vision of what would fit the best in your situation with their guidance. Besides, searching individually might take longer than seeking the assistance of a mediator who is well-versed in the lending industry.