This week we start off Financial Literacy Month by celebrating Small Business Week and honoring entrepreneurs who have shown resilience through uncertain times. It has been a rough couple of months to say the least. Small business owners across the country find themselves struggling to meet expenses, keep their employees safe and employed, and simply just keeping their businesses alive. Emergency relief funds promised to help businesses yet not every business has been approved for relief.
One common obstacle that the financial sector faced was the overwhelming number of requests for emergency funds.The effects were felt immediately on both the suppliers of relief and the receivers.Financial institutions had to prepare to process and disburse capital in record time. Business owners who had to quickly provide a variety of documents and financial information before PPP funds ran out.
While many businesses still wait for a response from their SBA-approved lender, we are left with some important lessons.
1: Financial literacy is key
Financial literacy is having the ability to effectively apply financial management skills to your business. Financial literacy includes understanding your income and how it is transformed into cash flow,knowing your operational costs, figuring out tax implications, among other financial aspects of running a business. Financial literacy comes useful when banks started requiring payroll documents, business expenses and tax forms to access PPP funding. Knowing what these documents show and having quick access to them not only help you make business decisions faster, but also help you apply for funding faster.
2: Do not deposit all your financial eggs in one basket
Banking relationships matter and having multiple banking relationships is a smart play. We have heard many stories of banks only providing relief funds to their existing clients, which means that you had a better chance of getting relief funds if you applied to multiple banks and you had existing relationships with them.
3. Explore the alternative lending space
Not only did large banks struggle to provide relief funds, small local banks that may have had faster processing times did not have the reach and scale of their big counterparts.But the big banks, the regional banks, and smaller banks and credit unions were not the only ones connecting businesses with relief funds.
Known for their speed and reach, alternative or online lenders like Idea Financial pivoted to ensure that businesses were able to apply quickly for relief funds and that such application was pitched to multiple SBA lenders at the same time. Such efforts gave businesses a chance for a quicker SBA approval. Alternative lenders were also providing a bridge for those businesses waiting for relief funds.
The way you finance your business is as important as any strategic, managerial and operational decisions. Improving your financial literacy, giving your business more options by building relationships with financial institutions, and lastly, exploring all financing options available proves to be three important lessons for any business owner. While financial literacy has become more relevant in times of crisis, it is always a smart idea to keep abreast of the best ways to fund your business.
If you are looking for PPP financing for your business please apply below: