On this episode of #TheMoneyFactor, CEO Ian Varley and digital marketing specialist Kelly Elson discuss small business entrepreneurship during recessionary times. How can you grow or start a business right now?
Why Start a Business or Grow a Small Business Right Now?
So, Kelly, you see a lot of trends, some of the stuff that I don’t see, particularly about new start businesses at the moment. Tell us about some of that. Part of what we do here is a lot of blogs and videos to inform small business owners but also people that are interested in becoming small business owners. Some of the things that we’re seeing is that there’s a lot more content that’s being clicked on for growing your business but also when starting a business from scratch. A lot of the business articles that I’m seeing around too when I’m looking other places are talking about how a lot of the big companies that we knew today got their start during a recession. So the idea behind this is whether you’re forced to take this plunge into entrepreneurship or whether you just simply pivot your small business to basically maximize and grow during a recession it can actually yield huge results at basically a discount when you’re thinking about it from a marketing perspective. Disney was one of the companies that came from a recessionary time. The way I think about it is, ‘why not do it now?’ And I think the answer all comes down to whether or not you have money. That would be the why not.
Do You Need Confidence to Start a Business Right Now?
Confidence is a reason as well. There’s a lot of people that think that they can’t get the funding that they need during this time. When you know money is tight, banks are looking at all sorts of things and reasons why not to fund you but what they don’t realize is that there are solutions out there for people. Particularly, there are solutions that help companies start and grow, and if they’re on exponential growth curves if they go and take out an online loan or something like that, they’re going to run out of cash very quickly. That will put them off.
How Can Purchase Order Finance Provide Opportunity to New Start or Small Businesses?
One of the things we’re finding is that people are coming to us for our purchase order product in particular. PO funding right now is getting so much traction because basically if you’re a mask company, that’s huge, and you know the pain points right now. So, it’s a good market to step into. What’s going to set you apart from the other ones? Well, it’s going to be having the ability to make those larger sales to companies like Walmart where they’re paying you way later, but they expect to have 10,000 units up front. Well if you don’t have the money to make that order in the first place then you’re going to have to turn down that business. You’re just going to be selling on Etsy and stuff for the rest of your time, and that’s going to be hard to turn a profit and have it become a real main source of your income. That’s going to be more supplementary.
Benefits of PO Funding:
PO finance right now is gaining a lot of traction based on our analytics of our website because basically the idea behind it is that you get money up front to create that order. You can then sell to Walmart and not really worry about raking in the profit immediately. You have it. You have the money to fulfill the order, and then you have the money from the sale instantly. And you can do that again. It just keeps building like that. PO finance is a great solution to how you can start or grow a business right now.
Can You Qualify for Small Business Financing to Start Your Business?
What’s important for people out there to remember is that you don’t have to have been in business for three, six, or twelve months. We don’t need to see your balance sheet. We’re going to underwrite you on the strength of the transaction, your business, and your customers that you’re selling to. So, if you are able to get that order from a Walmart or a large retailer then we can help. You we’re going to be able to put the facility together. So, don’t be put off if you’re just getting going now. Now is a particularly good time to consider getting into business, or if you’re a new start business and worried about getting the financing that you need to grow, think about alternative finance.
How Can You Better Budget to Maximize Your Business?
Some of the other things that we always encourage new prospects that are coming to us is really to get into that planning mode. Budgeting, particularly, is essential that once you know you’ve got the finance that you can then look at how you can ramp up your business. We can certainly provide you with the working capital, but don’t blow your overheads. Make sure you’re running a lean start-up. Keep control of those costs because otherwise things can get out of hand. If you’ve got the fuel, then we can provide you funding. We don’t want it to explode and then you have a problem. So we’re going to be helping you with those kind of thoughts as well. The most important thing when you want to start or grow a business right now is don’t be held back by thinking you can’t get the financing right now. So other things that we’re running into is that confidence level and people not having the cash on hand.
Do You Need Debt to Start or Grow a Business?
Looking at the experience of someone who is out of college maybe only a couple of years, you have all this student debt on your hands and you’re having to make all these payments on student loans. Banks aren’t really going to want to give you another personal loan in order to fund this venture. Mom and Dad might have cut you off already, so you’re pretty much on your own there. When it comes to taking on more debt, you’re probably not going to want to do that, or you’re not even going to be able to do that. That’s one of the things when I first started working here that just blew my mind. It’s debt free. That speaks to me because I’ve been taught to just be against debt. I don’t want to take any more on. I’ve never had a business before, so of course I don’t have business credit either. They’re looking at my personal credit. I don’t have a lot of years of history of personal credit. It shows I have a lot of things that are holding me back when it comes to taking on a loan.
How to Finance Your Business No Debt:
Not many people know about the type of finance that we provide. They’ll think about it as personal debt. Obviously, those are available to people, but a lot of people don’t want to take it. We’re not interested in your personal credit score. Underwriting decisions are about the nature of your business and who you’re selling to. It isn’t debt because you’re not having a loan from us. We’re advancing funds on the transaction. We’re bridging that gap between when you get the order and you fulfill it with your customer and you’re waiting for your customer to get paid. That’s what we are fulfilling, that cash flow gap right there. It’s not something that you have to make daily, weekly, or monthly repayments on. We’re going to get repaid by your customer when the credit terms are up that you’ve given to them.
Take Advantage of Office Space
Another unforeseen benefit of starting or growing a business right now is that office space is going to be remarkably cheap compared to last year for sure. That is because a lot of companies are working remotely. They don’t need the space so maybe they’re giving up the space or maybe they’ve gone out of business unfortunately. There are certainly companies even those that are growing are thinking twice about taking on additional space. So that is pushing the price of office space down. Another great way for a company to perhaps get a bargain deal with a landlord and get into a space that perhaps they previously wouldn’t have considered taking on.
Does Your Business Need Additional Employees?
Another thing we’re talking to our prospective clients about is the payroll protection program (PPP loans) that were obtained from the SBA. A lot of companies took them out and took advantage of the great programs that they are, but people are a little worried now about whether they can actually get forgiveness for those loans. If that money has been spent already, we’re finding that they are laying people off.
Now, the flip side to that is that there are a lot of quality people on the marketplace looking for work so if you are looking to hire talent at the moment, there’s plenty of it available. It’s worth having a look. On the other side of that same coin is that some people are getting laid off, and they’re saying, ‘What are my options? Nowhere is hiring right now. I might as well just start my own business.” So, there are a lot of qualified people that are being hired when they can or when a business is growing. There are also a lot of people that are qualified, and they decide to just be their own boss. That is appealing right now, and it’s not about confidence all the time. It’s kind of about being shoved into that space.
How to Survive as an Entrepreneur
People will be thinking about starting a business right now and using this opportunity. Perhaps they don’t want to get into the rat race, and they have an opportunity to jump into entrepreneurship. That entrepreneurial spirit is something that we admire here at Eagle. We support it with our funding programs. If you’re thinking of starting a business or growing your business, especially during these difficult recessionary times, here’s a few things that we’re finding are important for you to consider.
Having cash on hand is crucial. You must have it, and whether that’s access to some flexible funding sources such as Eagle or just having it in the bank, that’s a must for you as a small business owner. I think that’s probably the biggest barrier for this, too. Who wouldn’t want to go out there and do what they really want to do and what they’re passionate about? Typically, it’s going to be having the money to do that and having it reliably. That is kind of the second point here. You need to have a reliable source of money that you can draw from.
If you have $10k in the bank and you burn through it in a couple months, your business really never gets off the ground, and you don’t have any more access to funding that’s going to be an issue. Having a flexible funding partner will solve that. If you are able to land some really good-sized orders and you need an increase in your facility, you need a partner that’s able to react to that quickly. For example, we’ve got a staffing company on our books here at Eagle that’s recently won a new contract. Staffing as we come out of the recession is going to be a massive industry, so we’re helping these clients with increased limits, reduced costs, and reduced fees as they start or grow right now. This particular client needed something pretty much within the hour in order to help them decide whether to land this new contract or not. We were able to do it. Staffing companies were huge back in 2008 when we were recovering starting 2009, and it’s going to be huge again. A lot of my peers that lost their jobs are applying to these temp positions right now. These are qualified, well-educated people. Some of them have gone through master’s programs, and they are just looking for work, looking for an opportunity. So that staffing company, they’re going to have just tons of candidates to throw at businesses when this starts to kind of wind down and people are building business back up again when consumers are spending. If they don’t want to commit to necessarily a full-time hire, they will want to take them on in a temporary basis. Staffing and factoring work extremely well together because we can react to those changing needs very quickly and responsibly.
Allocating Your Time Responsibly
We’ve talked a lot about cost cutting and keeping control of costs. Factoring is not an expensive way to fund a business. Many people think it is, but it really isn’t compared to some of the alternatives that are out there. It’s extremely cost effective because not only are we providing the finance, but we’re also helping you with the management of your receivables. That can be super appealing. If you’re not a very finance heavy person and you’re more of a creative person. If you don’t want to deal with the back-end stuff, you don’t have to. You can if you want to, if you’re a type A person and you really want to get to know the numbers and you want to put together your own spreadsheets, do it. However, the fact that you can just go online and have a dashboard and it will show you what your aging is, that’s beautiful. We provide flexibility and having the information there available so that you can manage your business real-time.
Can You Cut Costs?
Another thing to think about is the systems that you’re using right now. Are they going to help you as you grow? Don’t be pulled in by the frequent emails that you get which is tempting you to a new and shiny product or something that you don’t need. Do be aware that there are some tools out there that will make you more efficient as a business. It’s about keeping control of those costs as you start or grow your business.
Could You Invest More?
Marketing right now is a really good place to put your money. Don’t just waste money on PPC and stuff like that if it’s not really worked for your business before, but there are some shiny tools we’ve invested in on the marketing side and we saw that it did benefit us. You can kind of think of your marketing budget right now as on sale. In a lot of other businesses, marketing is the first thing that gets slashed when a downturn happens. So, there’s less competition for those keywords if you are doing PPC. There’s less competition for some of the other advertisements that you have to bid on like LinkedIn or YouTube or you know whatever your market really lives. While marketing is one of those first things to get cut as you look at cost cutting, it’s not necessarily the right choice. So, be smart about those choices that you’re making to be cost effective. Just make sure that you’re not cutting off a source of new business if you are looking to start or grow right now.
Looking to Start or Grow Your Business Right Now?
If you’re thinking of starting or growing your company during a recession, don’t be put off by fears of lack of access to working capital. Do give us a call here at eagle and talk to Kelly, myself, or any of the Eagle team. We’d love to find out about you and your business and what your plans are. Hopefully our thoughts today have been helpful for you. Take a look at your immediate business financing options.