survive recession

3 Ways to Survive Recession as a Small Business

It’s no secret the economy is in recession. Small businesses are closing in waves. There is waning hope for additional government funding to support small business. How can you make it through with your small business intact? There are three main steps you should take to bolster your health and survive a recession as a small business.

How to Survive a Recession as a Small Business:

  1. Revisit Your Budget
  2. Manage Credit Risks
  3. Increase Small Business Working Capital

1. Revisit Your Budget

The first step you should take is to revisit your budget. It is almost guaranteed that your actual revenue is below your projected revenue. That is normal, and most other businesses will be in the same position. Review your budget for the year and ask yourself the tough questions. You may have to scale down your product offerings, software subscriptions, inventory, or even employees. This will be the hardest stage of protecting your business.

Are You Cutting Unnecessary Costs?

Not every expense is unnecessary. When looking to trim your budget, be sure you aren’t going to damage your revenue even further. Maintain the spending that is generating business, and you may want to even consider increasing spending in some areas. Marketing is typically the first item to get slashed in hard times. This can dig a deeper hole for your business.

2. Manage Credit Risks

If your cash flow takes a hit because of a downturn, it is expected that your customers are going to be struggling with their cash flow, too. Credit risk management is an essential part of making it through a recession with your business intact. You could have customers that have been strong paying for years, but you have to keep an eye on their payment status and extended credit. You will have a much higher risk of customer non-payment even with your long-term customers. Take a harder look at your credit limits and payment terms with your customers. Pay particular attention to your credit concentration. If your largest client went out of business tomorrow, would you follow suit? Make sure to diversify your client base and lower your credit risks.

understanding small business credit risk

3. Increase Small Business Working Capital

Banks are less likely to lend to small business during a recession. You have some small business funding options from government stimulus programs, but if these programs are not the right fit then you may be scratching your head wondering how to fund your business. The priority of funding your business during a recession is improving cash flow. You need working capital to make payroll, supplier payments, loan repayments, and/or any unexpected costs that pop up. The financing method you choose should increase your cash on hand without immediate or frequent repayments. Be wary of alternative financing companies that brag about immediate loans for any small business. There should be careful considerations of your business funding needs. This does not have to take weeks or months like a bank loan application process. There are plenty of small business financing companies that specialize in a fast underwriting process in order to fund your business more quickly.

Will Your Business Have Enough Working Capital in a Month? Six Months? How Will You Weather Recession?

Once you’ve evaluated your business funding needs for the short term. Look further. What does your business need to be strong now and strong in six months? Maybe you need a longer term loan. Maybe you need a debt-free financing option that does not require repayment, or maybe you just need flexibility in your available line of credit. Consider what impact your financing will have on your cash flow. Ideally, you have a financing method that improves your cash flow and offers funding flexibility or growth potential.

Invoice Factoring Can Help Small Business Survive a Recession

Invoice factoring is a reliable financing option for being able to survive a recession as a small business. Factoring services are debt-free, improve your cash flow, and have the ability to grow with your financing needs. Eagle Business Credit is a factoring company in Atlanta, GA that funds small businesses during recession. Our underwriting process is quick, and startup businesses or business owners with poor credit still have access to factoring facilities. This is because approval decisions rely on the strength of your invoicing rather than the strength of your personal or business credit. If you are a small business owner that sells to other businesses on credit terms, invoice factoring will increase your available working capital.

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