Small businesses create millions of jobs, boosting the U.S. economy. However, when a recession hits, like the one in 2008, it can be hard for small companies to recover and bounce back. All too often, many small businesses simply shut down. This article shares four ways to protect your small business during tough times.
1. Get Capital Quickly
You need to have capital secured before you truly need it. During a recession, financing becomes very difficult to obtain. During the Great Recession, many businesses were forced to declare bankruptcy due to banks refusing to lend to smaller businesses. When your business is doing well, take the time to ensure you have financing available. Research your options on alternative financing for your business such as invoice factoring, angel investing and Small Business Administration loans.
Whether your business is thriving and you can’t keep up, or you are waiting on clients to pay their invoices, Universal Funding can help your growing company. Call us at 855.212.7389 or complete our rate form today to learn more about invoice factoring and how it can improve your company’s cash flow.
2. Keep Employees in Mind
When it comes to hiring employees, carefully consider how many team members you need. It may be tempting to hire more people when your business does well. However, doing so may cause you to lay off reliable people during a recession due to not being able to make payroll. When there are rumors of an economic downturn, talk to your staff about your plan to keep the business afloat. Open and honest communication with your team members is one of the most effective retention strategy tools during difficult times. You can also look to other successful business to see how they weathered challenging times without staff lay-offs.
3. Reconsider Large Investments
It only makes sense to upgrade your business when it is growing and doing well. However, think through any big changes to the company, especially if there is potential trouble on the horizon. Make sure that you will get a return on investment with any big purchases you make. Having extra cash on hand will make the difference during an economic downturn.
4. Create a Plan with Suppliers
During a recession, your suppliers may need to slow down their business. Talk to them to see if they have a plan in place during a downturn. It is best to continue a long-term relationship with them and offer your support. However, keep a few alternate vendors in mind just in case your go-to suppliers are having trouble providing what you need.
The Bottom Line
Recessions are tough, especially for small businesses. You can protect your company by making smart decisions and planning ahead. When you are prepared, it will make the economic downturn more tolerable.
About Universal Funding
Universal Funding is a private funding source that has funded thousands of businesses and more than $2 billion since 1998. We turn your accounts receivable into the funding you need through invoice factoring and can have working capital in your hands in a matter of days.