Major Financial Challenges That SMBs Face

    It’s no secret that many startups and newly found small businesses struggle with financial issues. As a matter of fact, 8 out of 10 entrepreneurs fail at their business endeavor because of the lack of proper funding. Developing a business, while trying to position yourself in an overcrowded and competitive market is difficult enough on its own. In addition, growing a business isn’t cheap and there are many expenses that need to be taken into consideration, such as the operating cost, manufacturing, employee salaries, taxes, bills and many more.

    A simple financial mistake can prove to be harmful enough to result in business failure. That’s why it’s important to put emphasis on finances and manage them accordingly, in order to ensure business success. Planning your budget and finances accordingly will help you overcome any obstacle you may face. Here are a few of the major financial challenges that small businesses face.

    Positive cash flow issues

    Cash is king in the financial aspect of the business world. The main reason cash is so valuable to businesses is that allows you to make purchases or cover unexpected expenses right away. What’s more, cash is highly more liquid than trading in assets or property. Simply put, without cash and positive cash flow, businesses go into debt that may eventually lead to bankruptcy.

    The cash flow can be estimated by calculating the cash coming into your business from accounts receivable, such as sales, and the cash going out of your business i.e. accounts payable, such as taxes, bills and other expenses. If there’s more cash coming into a business than it’s going out, your cash flow is positive and vice versa. Many new businesses that don’t have enough initial budget or working capital must take a loan or establish a line of credit to ensure a positive cash flow. What’s more, a cash flow is also used to determine a company’s financial performance, as well as its liquidity.

    Fast business expansion

    While some businesses struggle to maintain their position on the market, others experience an extremely fast business expansion that they can’t keep up with. When your business starts to grow rapidly, you must be financially prepared to support it. Otherwise, a fast business expansion may outright kill your business. Many business owners get caught off guard when they’re faced with rapid business growth. So much in fact, that they try to mend the situation by sacrificing quality to meet the new demand for quantity.

    However, just because there are more customers and demand for products or services, it doesn’t mean that your customer expectations have declined. The biggest challenge here is facial support. Many businesses don’t have the funds to endure fast expansion on the market. If you lack the funds, you can always apply for cash loans online. It’s a more flexible way to get a financial boost fast and you won’t have to wait too long like when applying for a loan at the bank.

    Taxation issues

    Federal taxes are one of the major concerns of every small business owner. The main reason is that it’s oftentimes difficult to calculate the taxes properly based on the nature of the business and its structure. As an example, many business owners choose the sole proprietorship as the business structure, because it requires the least amount of paperwork, licensing and taxation. However, other business structures, such as the LLC (Limited Liability Company), “S” corporation and others, come with tax advantages and a lot less liability than the sole proprietorship.

    That’s why it’s important to pick the right business structure or change it to match your business performance, as well as to help you understand your tax obligations. Moreover, missed tax payments can lead to even bigger financial issues for business owners. In addition, many business owners do not know they have tax advantages and tax deductibles that can aid them in making a taxation plan. It’s also important to monitor any spikes in federal income tax, so that you’re ready if the rates go up and your taxes increase.

    Being too founder-dependent

    Many small businesses are founder-dependent, which means that the founder makes all the important decisions and takes care of major business operations. However, such businesses can easily end up in all kinds of difficulties, not just financial issues. When something happens to the business owner, in such scenarios, business operations come to a halt because there’s no one that is supposed to take on the responsibility.

    Owners who refuse to delegate work to their partners or employees are putting their entire business at risk, especially because if the owner isn’t present the business can’t continue to operate. That yields to major financial issues because there’s no way to generate income if there’s no one to make important decisions. Furthermore, expenses will continue to grow and bills will continue to pile up in the meantime. That’s why it’s important to have someone who can ensure that the business flow can continue without delays, even if the owner isn’t able to do so.


    Financial issues are common in the business world, especially with startups and small businesses that are new to the market. There are plenty of expenses to be aware of, as well as unexpected expenses that might prove to be an unpleasant surprise for you if you’re not prepared enough. That’s why it’s important to familiarize yourself with all the major financial issues that are most commonly present in the business world. That way, you can create a plan that will help you grow your business and financially support it as well.

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