A side view of a professional woman in a business blazer sitting at a desk in a bright, modern office. She is focused on her work, typing on a laptop with a large window in the background, representing a business owner mastering a strategic pivot.

When crisis strikes, small business innovation shines

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During times of economic uncertainty, get inspired with these lessons on small business innovation.

“It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is most adaptable to change.”
—Charles Darwin

When major world events send shockwaves through the economy, businesses often have to rethink their business models and growth strategies. Though it’s easier for companies with deep pockets to take big chances on new ideas, recently, small businesses are proving their skills of thinking further outside of the box to find innovative revenue streams that pay off.

For one Montreal entrepreneur, Bijan Bolouri, such a situation occurred when the COVID pandemic hit while he was vacationing in Florida with his family.

It was early March, just a couple of weeks before the province of Quebec ordered all non-essential business to close, but the co-founder and CEO of b.cycle, which operates three fitness studios in Montreal’s downtown, Old Port and Westmount neighbourhoods, says he wasn’t waiting for an official mandate to put a plan into action.

“The news was starting to explode and I knew we had to be proactive. It was clear to me that we would be closing all three studios. The only questions were when and for how long?”

Like many business owners quickly facing unprecedented situations, he was forced to adapt to the new normal— and learned some valuable lessons about resilience along the way.

Lesson 1: Slow down and resist the urge to react hastily

The company immediately went into problem-solving mode, with a critical focus on how to retain its eight full-time employees and a part-time workforce of 22 others. Before the pandemic hit, Bolouri says the five-year-old company was having its best year to date. This gave him a financial cushion and some extra time to formulate a survival strategy.

“As stress mounts, it’s important to take a step back to look at the big picture. It’s easy to make a quick decision to try and solve a problem when emotions are running high, but those quick fixes are usually very short-term. When we closed the studios, we were planning to be closed for at least three months, even though at that point the government was saying two weeks.”

Lesson 2: Be prepared for a dramatic drop in revenue

While seasonal highs and lows are common in many industries, a massive unexpected dip in sales can be crippling. Having a contingency plan in place, and the right contacts at your fingertips can get you through, as was the case for b.cycle.

When the busy studios that usually have more than 4,000 customers a month shut down, b.cycle’s revenue plummeted by 90 to 95 percent. Bolouri immediately took himself off the payroll to ensure he could retain full-time staff While this wasn’t an ideal solution, it was a temporary band-aid that ensured he could keep paying his employees.

The company also tapped into some of the government assistance programs and reached out to key partners to negotiate its financial commitments. He also worked with his business colleagues and partners to free up cash flow.

“We had very open discussions with our banks and suppliers who lightened the load for us. It was phenomenal,” Bolouri explained.

Lesson 3: Focus on where you can help

Shortly after the studios closed, Bolouri pulled his team together for a brainstorming session on how to generate revenue while continuing to support the community amid so much uncertainty and anxiety. 

“From day one, our philosophy has always been to provide the highest level of customer service. We are constantly asking ourselves how we can take care of the community and do right by them.” 

Even the smallest actions, such as communicating regularly with your customers, can go a long way in maintaining a high level of customer service.

pivot for the win

Lesson 4: Pivot for the win

That mission gave birth to b.cycle’s launch of free online classes on Instagram to its more than 11,000 followers.

“The team was really emotional when we had to close,” Bolouri recounted. “Everyone wanted to do something to help, so we started offering the online classes almost immediately.”

The response from the b.cycle community was swift and dramatic.

“Right away they started asking how they could help us (to ensure the company stayed afloat). We created a donation page on our website, and the community gave back to us big time. Hundreds of people made financial donations, and that supported the entire team of instructors.”

Lesson 5: Spin gold from straw

At the same time, demand was ramping up for spin bike rentals. Bolouri answered the call by renting out the studio’s fleet of bikes on three-month contracts at $50 a week, deploying some of its part-time workforce to clean, deliver and set them up in customers’ homes.

That pivot led to an entirely new line of business (and revenue stream) for the company.

In May, it launched b.Home, a digital platform that offers more than 40 live classes a week as well as on-demand spin and body classes, allowing users to keep up with their fitness regimes from the comfort of their homes.

“We spent three weeks strategizing the business plan,” Bolouri continued. “It was a big investment. We bought a bunch of bikes and created a brand-new online platform from scratch. We also launched an online shop to sell merchandise.”

It can be a daunting task to pivot your business plan when the unexpected hits — especially for small businesses that have limited cash flow. Taking the lessons learned by other business owners and applying them in your own organization can help put you on the fast track. And when crisis strikes, be sure to rely on your own small business innovation.

About Liquid Capital

At Liquid Capital, we understand what it takes for small, medium, and emerging mid-market businesses to succeed – because we’re business people ourselves. Our company is built on a network of locally owned and operated Principal Offices, so whenever you’re talking to Liquid Capital you’re talking directly to your funding source and a fellow business person.

Small business giving back.

The power of good: 3 great stories about small businesses giving back

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No matter the size of the company, all it takes is people with a passion to help others. Here’s how some small businesses are giving back.

Small business giving back.

It’s not uncommon to see big brands with deep pockets taking action on major social issues like climate change and education. Many have adopted formal corporate social responsibility initiatives and want to be seen as good corporate citizens doing their part to combat social problems.

While smaller businesses don’t have the same financial clout, many donate their time, money and resources to support worthy social causes. In a 2019 study, 72% of people surveyed said they believe locally-owned businesses were more likely than large companies to be involved in improving their communities, reports Harvard Business Review.

With that in mind, here are three companies that are making meaningful changes in their communities and beyond.

1. First Step Staffing

First Choice Staffing

Breaking the cycle of poverty for people in socially disadvantaged populations is a mammoth challenge. It’s also the mission of First Step Staffing, a U.S.-based staffing organization that employs men and women experiencing and at risk of homelessness or facing other barriers to employment.

Founded in Atlanta in 2007 by Greg Block, the non-profit has nine offices in Georgia, Pennsylvania, Texas and California. Over the years, the organization has helped thousands of vulnerable people find positions with First Step’s corporate customers that don’t necessarily have the capacity to interview and hire workers themselves.

The businesses that partner with First Step benefit from the organization’s holistic approach to staffing services. Not only does the organization provide job coaching to ensure workers are prepared when they show up, they also offer transportation to and from job locations, which are often outside of the city and not easily accessible by public transit. In many cases, businesses end up hiring the temporary workers on a full-time basis.

Escaping a troubled past

One of the organization’s success stories is Camden, New Jersey resident James Redd. When Redd returned home after a five-year stint in jail, he was looking for a fresh start and a job to help support his three children. 

The return to civilian life is daunting for those who have been imprisoned. In the U.S., state and local governments have no obligation to help a prisoner re-enter society.

Through First Step Staffing, Redd was able to land temporary work at a local food services company where he was praised for his hard work and dedication. After logging 400 hours as a temporary employee, Redd was hired full-time, an opportunity he describes as “life-changing.”

2. Peace by Chocolate

Peace by chocolate

In 2015, Tareq Hadhad and his family arrived in Antigonish, Nova Scotia, after fleeing war-torn Syria in 2012 — and leaving everything behind.

The Hadhads were determined to rebuild their lives and make a positive contribution to the community that sponsored them. In Damascus, Tareq’s father Assam was a successful chocolate maker, employing 30 people and shipping his confections all over the Middle East. Now living in a new country, they decided to continue the family tradition in Canada.

From refugee to entrepreneur

Eight months after arriving in Nova Scotia, with the help of volunteers, the family built a social enterprise –– Peace By Chocolate –– which sells sweet treats around the world. 

The company quickly grew, aided by some high-profile shout outs like the one from Canadian Prime Minister Justin Trudeau in an address to the United Nations. 

Paying it forward

Beyond supporting social causes around the world through its charitable foundation, Peace on Earth Society, Hadhad plans to hire 50 refugees by 2022 and to mentor 10 refugee-run start-ups over the next few years.

Today the company employs about 60 people and they are gaining great attention for their work. In fact, the family’s success story will be chronicled in a feature film, which is currently in production.

3. Harold’s BBQ

Harolds BBQ

Before he launched Harold’s BBQ Restaurant, Linden Massey drove an 18-wheeler for 38 years. He knows how challenging it can be for long-haul truck drivers to find a hot meal on the road. So when the COVID-19 pandemic hit and closed many restaurants, Massey made it his mission to feed the essential workers who are so crucial to the supply chain.

Chipping in for the cause

Over the course of the past few months, Massey and his staff at the Corning, Arkansas diner have served up more than 2,500 sack lunches to truckers from the U.S., Canada and Mexico passing by his restaurant.

But he hasn’t done it alone. When Massey started to run out of supplies for the hot sandwiches, he took to Facebook asking for help. 

«They can only eat out of their refrigerator and cooler for so long,» Massey said in an interview with the local TV station. «I said, ‘I’ve got to get them a hot sandwich. But, I just didn’t have supplies.’ «

The business owner was flooded with food and financial donations, both from the local Arkansas community as well as corporate donors like McDonald’s, Little Debbie and Frito Lay.

Thank-you cards and letters now line a wall inside Harold’s BBQ, and Massey was also the June recipient of Corning’s Gr8 Random Acts of Kindness award.

Good corporate citizens

As you can see, it’s not uncommon for businesses of any size and in any industry to give back to their community. Even if you might be tight on cash flow or don’t currently have enough resources to begin your own initiative, investing time in social responsibility can be a great way to give back and contribute. Doing so will not only give your brand a boost but will also spread morale throughout your company.

About Liquid Capital

At Liquid Capital, we understand what it takes for small, medium, and emerging mid-market businesses to succeed – because we’re business people ourselves. Our company is built on a network of locally owned and operated Principal Offices, so whenever you’re talking to Liquid Capital you’re talking directly to your funding source and a fellow business person.

Liquid Capital highlights 7 proven cash flow tactics that every CFO needs to know

7 proven cash flow tactics every CFO needs to know

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Part 2 in the Cash Cycle series: Use these cash flow tactics to unlock the working capital you need to achieve your business goals.

If you’re running a business, your “cash conversion cycle” (or “cash cycle”) is a vital component of your financial analysis. It tells you how many days it takes for your company to turn your inventory purchases into cash. The shorter your CCC, the more flexible your working capital — and that is every business owner and CFO’s dream.

With more liquidity and a shorter CCC, you’ll be able to pay bills, make payroll, take advantage of supplier discounts, order new inventory and grow faster.

 

Want to learn more about smart cash flow strategies? Check out our Ultimate Cash Cycle Guide

 

But to shorten the cash cycle, you need to first find a way of adjusting these three key variables:

  1. DIO: Days Inventory Outstanding.
    • The average # days you turn inventory into sales.
  2. DPO: Days Payable Outstanding
    • The # of days it takes to pay your accounts payable.
  3. DSO: Days Sales Outstanding
    • The # of days it will take to collect on sales after they’ve been made.

Want more details on CCC including DIO, DPO and DSO? Read part 1 now.

Once you’ve established your cash cycle, the next step is to implement positive changes to these three variables — ultimately, to shorten your CCC. Luckily, these cash flow tactics can help you achieve this:

1. Sell quicker with improved sales times

Improve cash flow

Selling faster is every company’s goal, but it’s often easier said than done. Taking the time to evaluate your sales process can be a good first step. Identify areas of your sales cycle that can be improved and then implement changes immediately. The goal here is to shorten your DIO and turn your inventory into cash quicker.

2. Build strong relationships with suppliers

You can also shorten your DIO by improving upon your current supply chain. You’ve likely worked hard to develop good relationships with suppliers, so now try to get more favorable terms and agreements to keep your inventory flowing. Idle time and idle inventory are a big expense.

Where possible, take advantage of just-in-time inventory practices, where your goods arrive only as needed. In the past, this was popular for industries such as manufacturing and perishables.

More recently, this has become common in retail and e-commerce, including a wide variety of industries, with a rise in dropshipping. In this inventory model, companies never handle their own inventory – instead, when your customer orders arrive you’ll purchase the inventory from a third party who ships directly to the end customer on your behalf.

3. Better credit and collection process

There’s no doubt that an effective collections department will improve your ability to collect customer invoices on time. Effective collections can help create a more stable and reliable DSO. However, this requires staff training, likely more personnel hours (translating into payroll costs) and leadership’s time to make sure this process is effectively managed.

4. Investigate extended payment term options

cash flow tactics - extended payment terms

Extending your accounts payable will increase your DPO, and help offset the other two factors of your CCC. But this could negatively impact your relationships with suppliers if you extend too much, and breaching the terms could put you at risk of becoming the delinquent account you’re trying to avoid in your own A/R. 

If you have nurtured a strong relationship with your suppliers, then you may be able to ask for extensions on your payment terms without negatively affecting your standing with suppliers.

5. Reduce your 30/60/90 day payment terms

Fortunately, you’re in control of your accounts receivable terms and can shorten them to receive payment earlier. By reducing your terms, you lower your DSO and speed up your cash cycle.

Unfortunately, many customers request and expect longer terms. Some industries abide by certain time frames to pay, which may not match up with your cash flow needs. And other customers will be delinquent on payment no matter what terms you agree upon. You may risk losing sales to competitors offering better terms.

6. Early pay discounts

These are generally not very effective at reducing your DSO and some customers take the discount even when they pay on normal schedules. Overall, this can lead to lower revenue than expected, which doesn’t amount to a cheap option.

 

Strategic Financing

7. Smart & strategic financing

Being strategic with your billing and collections is one of the most accessible cash flow tactics that you can use to improve your cash cycle, and you can use commercial finance solutions to dramatically shorten your DSO. In fact, instead of having a DSO of 30/60/90 or more days, you can have a DSO of one day.

 

Up Next:

Read Part 1: How to determine your company’s “cash conversion cycle”

Cash conversion cycle

Read Part 3: Learn how to leverage your assets to grow your working capital

Grow your working capital

Read Part 4: Learn how to keep suppliers happy and cash in your pocket

About Liquid Capital

At Liquid Capital, we understand what it takes for small, medium, and emerging mid-market businesses to succeed – because we’re business people ourselves. Our company is built on a network of locally owned and operated Principal Offices, so whenever you’re talking to Liquid Capital you’re talking directly to your funding source and a fellow business person.

Small business bookkeeping

7 small business bookkeeping tips for time-pressed business owners

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Is your small business bookkeeping taking too much time out of your already-busy day? Here are some quick tips to simplify your financial admin.

small business bookkeeping

Remember a time when it was so simple to sort your business receipts, bills, invoices and general paperwork? You might have just been getting started and spent a lot more time growing your business than you did organizing your books. But then you started selling more, got more customers, more paperwork flooded in and everything erupted!

Managing administrative work can become complicated as your business grows (especially if that growth happens quickly) and that once simple admin process can quickly escalate into a daunting challenge. 

Now, even a small error or oversight can impact your P&Ls, Income Statement, revenue projects — and snowball into a big end-of-year mistake that affects your payroll and taxes. So save your money, time and maybe even some gray hair by establishing an easy-to-follow bookkeeping process.

Here are seven essential bookkeeping practices that every small business owner should follow:

1. Separate your business and personal finances

This is essential for every business. Personal finances need to be kept separate from your business expenses, which is best done from the initial point of purchase. If not, you’ll end up with a mangled mess of expenses within multiple account statements to sort through and label at the end of the year. You also don’t want to end up with a shareholder account that is too high — forcing you to claim that ‘additional’ income all at once.

To limit the crossover, don’t use your personal credit card for work purchases and vice versa. However, this can happen from time to time (standing in the checkout line and realizing you don’t have your other card), so make a note of that and flag it immediately with your bookkeeper. It can be helpful to take a picture of the receipt just in case you misplace it along the way or invest in a small business bookkeeping mobile app 

 

Small business bookkeeping tips: Financial Statements

2. Document all expenses

No matter how small the expense, it’s important to track your purchases and payments. Whether it’s on a company credit card, debit account, by cheque or a cash payment, keep a record of those transactions. In addition, download your banking statements each month so you have a file of those for easy access on your hard drive. 

If you have a bookkeeper or admin person, ensure they have access to those statements and are reconciling every month — flagging any questions and clearing them up so you don’t have a backlog later in the year (when you might forget what happened months before.) This also helps you assess your business cash flow in real-time and understand where potential gaps may lie.

Related: 3 biggest financial challenges facing business owners

3. Schedule weekly bookkeeping time

Aside from the monthly reviews, set aside time in your calendar for weekly admin time. This could even be 30 minutes every Monday morning to update your Quickbooks or financial software, pay bills and review bank account balances. By making it a regular and easy task, you will feel more in control of your business financials and less intimidated at the end of the year when you need to dig into the dusty books.

 

Small business bookkeeping & accounting tips

4. Follow up on account receivables

Even more critical is ensuring the money owed to your business is coming in on time. Knowing when invoices should be paid and how that impacts your cash flow is critical to making future business decisions. Within your accounting software, ensure all invoices are entered with the right term dates. 

In your weekly bookkeeping time, review this section to see what has been paid, what’s coming due and, most importantly, what is past due. If you have a collections person or team, get them on the case asap. But if it’s just you managing the books, pick up the phone or send an email to follow-up on the payment. The personal touchpoint with the customer could help get payment quicker and further solidify a good relationship.

5. Monitor cash flow trends

The worst-case scenario in business is running out of cash at a pivotal time. By monitoring your accounts, knowing the seasonal trends in your industry and having a reliable projection for your business, you’ll be ready well in advance. So how do you do that?

Setting up a cash flow statement and budget is step one. (You can follow the steps here.) Next, calculate your DSO, DPO and DIO as part of your cash conversion cycle, which can reveal a host of opportunities and potential roadblocks in your way. Look for warning signs such as taking too long to pay suppliers, changes in sales or customer reorders, or even unusual spikes and dips in payroll. Anything out of the ordinary could warrant a little extra attention.

 

Small business bookkeeping & outsourcing to a professional

6. Outsource to a trusted pro

Despite your best intentions, sometimes the admin work for your business will still be your last priority. Getting help on these steps ensures that things are managed proficiently — freeing you up to spend more time on running the sales, service and operations of your company. 

If you don’t yet have a bookkeeper, look into adding this role (even part-time or on contract), which could save you countless hours. Your accountant may offer this service already or offer a referral to their trusted network, so start with a conversation with the professionals already on your team. 

When it comes to your accounts receivables and collections, when getting financing through invoice factoring at Liquid Capital, our team will also take care of that portion for you. 

Here are additional benefits of invoice factoring.

 

7. Reconcile monthly

This one is so important that it gets its own section. Reconcile all your paperwork and books once a month, along with your accountant and bookkeeper (as applicable). By reconciling monthly, you’ll catch errors associated with cash inflows and outflows earlier, keep accurate up-to-date records and be ready for financing if you’re ever in need. 

Staying on top of the admin will alleviate stress, a much-needed relief for most business owners, and prepare you for those unexpected surprises that are around every corner. 

 

Learn how to become lender friendly in our free eBook here. Get instant access with no download needed.

 

At Liquid Capital, we understand what it takes for small, medium, and emerging mid-market businesses to succeed – because we’re business people ourselves. Our company is built on a network of locally owned and operated Principal Offices, so whenever you’re talking to Liquid Capital, you’re talking directly to your funding source and a fellow business person.

"resiliency" spelled out in Scrabble tiles.

Why every business owner’s most valuable asset is resilience

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As a business leader, can you overcome adversity & daily pressures? Here’s why your resilience matters most & how to bounce back.

Resilience is a business leader's greatest strength

As far as inspirational commencement speeches go, it was a bit of a shocker.

When chief justice John Roberts of the United States Supreme Court addressed a graduating class in 2017, he wished them … bad luck.

“From time to time in the years to come, I hope you will be treated unfairly so that you will come to know the value of justice,” he said. “I wish you bad luck, again, from time to time so that you will be conscious of the role of chance in life and understand that your success is not completely deserved and that the failure of others is not completely deserved either.”

Only by experiencing adversity, Roberts suggested, can we develop the crucial quality we need to get us through it: resilience.

From Nietzsche to Kelly Clarkson

As a business leader, being ‘resilient’ allows you to “withstand or recover quickly from difficult conditions,” which you may face both internally and externally. An economic downturn, a market disruption, a botched expansion. A cancelled contract, an inventory snafu, a product that sinks like a stone. Unpaid invoices, unforeseen logistical roadblocks, or an employee who is underperforming.

How do you muster up the strength and courage to face the daily onslaught of challenges? Some will chalk it up to ‘entrepreneurial spirit,’ but author and psychologist, George Kohlrieser, points to resilience as the key. He defines this quality a step further, as it pertains to corporate and organizational leadership: 

“Resilience is the human capacity to meet adversity, setbacks and trauma, and then recover from them in order to live life fully. Resilient leaders have the ability to sustain their energy level under pressure, to cope with disruptive changes and adapt. They bounce back from setbacks. They also overcome major difficulties without engaging in dysfunctional behavior or harming others.”

To paraphrase Nietzsche – and a Kelly Clarkson song — “what doesn’t kill you makes you stronger.”

So what does resilient leadership look like? These snapshots may give you an idea. 

Business failure

Accept (and expect) failure 

Before launching New Coke, Coca-Cola CEO Roberto Goizueta conducted blind taste tests with nearly 200,000 consumers. After New Coke aced those tests, it hit the market on 23 de abril de 1985. 

But New Coke fell flat. Coca-Cola was bombarded with thousands of angry calls and letters demanding the return of the original flavor. Just 79 days after introducing New Coke, Goizueta owned up to his mistake and brought the ‘old’ Coke back.

What went wrong? People’s hearts – their intense emotions about a century-old brand – simply overruled their taste buds. Goizueta learned that even if your business seemingly takes all the right steps (remember the 200,000 blind taste tests?) things can still go horribly wrong.

Despite your best planning and execution, failure will sometimes happen. Accept that. Expect that. And if it happens to you, learn from it.

Resilience is about being realistic

For James Stockdale, former U.S. vice-presidential candidate and high-ranking naval officer, taking a realistic view proved to be his saving grace. Although Stockdale survived seven years of torture and imprisonment during the Vietnam War, many of his fellow POWs tragically did not. 

As he explained to now famous business author Jim Collins, the most optimistic prisoners were, surprisingly, the least likely to make it out alive:

“They were the ones who said, ‘We’re going to be out by Christmas.’ And Christmas would come, and Christmas would go. Then they’d say, ‘We’re going to be out by Easter.’ And Easter would come, and Easter would go. And then Thanksgiving, and then it would be Christmas again. And they died of a broken heart.”

Collins calls this the Stockdale Paradox, and warns business leaders of its dangers in his bestselling book Good To Great. As he further explains, “you must never confuse faith that you will prevail in the end — which you can never afford to lose — with the discipline to confront the most brutal facts of your current reality, whatever they may be.”

Being resilient means being realistic about your situation, not deluding yourself with false optimism.

Hit your business goals

It’s not about being ‘perfect’

Roy Halladay won a lot of things, including two Cy Young Awards and a place in the Baseball Hall of Fame. Yet the pitcher’s relentless pursuit of perfection cost him his life.

After Halladay fatally crashed his small plane in 2017, an autopsy revealed morphine, alcohol, antidepressants and amphetamines in his system. How could someone so perfectly in control out on the baseball field spiral so out of control in his life?

Biographer Todd Zolecki says Halladay’s constant overtraining and insistence on playing for decades after a spinal fracture, ultimately led to his addiction and downfall. “Because he was so determined, he just felt like he needed to push through it, even though he was in such tremendous pain. But he just couldn’t walk away. He could never turn off the ‘I have to go max effort’ switch,” as Zolecki explained.

In the battle of resilience vs. perfection, the baseball star’s loved ones could see he was not able to overcome and bounce back. Brandy Halladay told Zolecki her husband’s quest for a perfect career took a toll on the most important team of all – his family. As she described, “everyone else [was] getting the hero and we’re getting what’s left over.” Instead of even spending time with their kids, he was left struggling with his physical and emotional pain. 

Extinguish flames

Extinguish your inner saboteur

When we experience a rough patch, it’s often easy to dig yourself a hole and focus only on the negative side of things. Author and business coach Paula Hope defines this as your inner “Saboteur” as she explains in her book focused on conquering negative thoughts that can equally impact your sales revenue.

“A Saboteur, in the context of new business development and the business professional who offers their professional services, is a negative thought, or series of thoughts, that create a level of emotional discomfort for the business professional.” 

Part of being resilient, as we have now come to understand, is to be able to overcome being knocked down. It’s important, regardless of the Saboteur’s intensity, that you don’t let it affect your confidence as well as your business performance. You will not be able to move forward without ridding yourself of those personal fears and doubts.

Business leaders ask for help

Don’t be afraid to ask for help

Perfection is impossible. Instead, reach for the inner strength to bounce back, instead of bending to the point where you (or those around you) completely break. Take care of yourself personally as well as professionally. And when you need help, reach out for it.

 

Next up: How asset-based lending work

Business owners and entrepreneurs will undoubtedly face financing issues and new opportunities requiring access to working capital. If you are searching for ways to overcome one of these challenges, reach out and we’ll provide you with information and options to explore. 

Images from Pexels, and Pixabay

selling PPE

Selling PPE? Follow these steps to secure funding

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What a time to be in this business. Whether you were already selling PPE in the past or not, you may have found that you’ve somehow fallen into the space.

selling PPE

 

Orders are flying fast and furious for face masks, shields, gowns, gloves and that ever-critical hand sanitizer! From cities and government offices to private companies and industry organizations  — everyone is placing an order.

You may have all the supplier and trade connections to secure PPE inventory, but not enough working capital to close the deals. So how do you make sure you can deliver — especially if you’re presented with a surprise PO?

Here are six tips to help you access funds:

 

fake deal

Tip 1: Make sure the deal is legitimate!

There are a lot of fake deals and scammers out there, especially when selling PPE. Nefarious people are quick to take advantage of an industry in hot demand, so do your due diligence to ensure whoever you’re talking to has a credible business. Get professional help at this step, and ask your lawyer, banker, collection firm or other partners to do required background checks and extra investigation.

 

funding options

Tip 2: Investigate your funding options

You likely already have a banker on your side, and that can often be step one. But if you have a maxed-out line of credit, or a loan that can’t be extended, how will you get more funds released to make a new deal go through? Check out your options such as government programs (many are listed here), the CDFI Fund, community lenders and alternative lenders such as us here at Liquid Capital. We are happy to work alongside your banker.

 

funding partners

Tip 3: Connect your banker and your alternative lender

This step will benefit you greatly, for two main reasons…

1) It tells you that both your banker and your alternative lender are the trustworthy partners you need right now. They’ll be working together, in partnership, to help your business get the much-needed access to cash — as quickly as possible. If they aren’t willing to work together, you’ve got the wrong people on your side.

2) It gets you out of the weeds. You’ll have a lot more to focus on to close a PPE deal quickly, so having to be involved in the nitty-gritty of every aspect of financing decisions between the banker and lender would take up a lot of your time. Meet with them regularly, of course, but make sure they connect even more often to power through the details.

 

clever

Tip 4: Get clever about order on receivables

When you’re dealing with large financing deals and multiple partners, you’ll no doubt hear about the order in which your lender and banker will need to be placed on your receivables — also known as the subordination agreement. This might not be your decision ultimately, but don’t let this be a deal-breaker.

While your original financing partner may have first position, a new lender may also require they take this top spot. Someone’s got to give, but there are different ways of structuring deals, and you could suggest a split in the territory or some other method of segmenting the positions. For example, a second lender may be able to only take first position in one State, while the original lender retains first position across the rest of the globe.

 

Related: Learn how to become lender friendly and why you should perform a UCC search on your own company.

 

speed red flag

Tip 5: Speed is important, but too fast could be a red flag.

If you’re supplying PPE, your client likely wants their shipment yesterday. That will put some major urgency on your financing. If you’re structuring a PO financing or invoice factoring deal, for example, these can be done relatively quickly — but it will save you time, money and headaches in the long run if you go through the proper steps. If a lender promises they can rush this beyond a believable timeframe, be wary. You don’t want to get into a situation where you actually end up owing on payday loans or merchant cash advances — with enormously high rates.

 

deal

Tip 6: Line up an expert now, even before you have a deal

You might not yet have a PO, but the moment you do, you’ll want to have a trusted partner on stand by. If you’re currently selling PPE (or could be) — or your company does business for any essential service — start talking to new lenders now. Find out what solutions they offer, how they can structure deals, what other industries they work with, and their history of funding businesses like yours. Short-list the ones you think could help you, and you’ll be that much more prepared when a new client comes knocking on your door with the next big order.

 

Next up: How asset-based lending works

 

About Liquid Capital

At Liquid Capital, we work with clients who are selling PPE and those in other essential service industries — supply chains, food services, financial services, manufacturing, transportation services, construction, and resources and energy. Whether you’re currently operating from a virtual home office, or you’ve shifted back to the busy downtown hustle and bustle, we know business can’t stop. We’re business people ourselves, and our company is built on a network of locally owned and operated Principal offices. Whenever you’re talking to Liquid Capital, you’re talking directly to your funding source and a fellow business person.

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How asset-based lending works

How asset-based lending works

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You might have heard about the term «ABL» — but don’t know exactly how asset-based lending works. Get the overview here in this 3 minute read.

How asset-based lending works

For small, medium and large-sized companies that are in search of alternative ways to secure funding — hopefully due to growth and positive strategic pivots — asset-based lending (ABL) could be a potential solution. ABL works by utilizing the assets your business already has, such as accounts receivable, inventory, machinery or equipment as collateral for a loan.  

Here are the basics of ABL and how it could work for your business.

Why ABL?

Asset-based lending has a number of benefits over traditional bank loans. Some of these benefits include:

  • Speed: Delivery of funds via ABL is generally much faster than traditional banking tools.
  • Improved liquidity: ABL can help make your cash flow much more predictable — particularly during times of rapid growth.
  • Flexibility: Funds received via ABL can be used for almost any purpose as long as it is a business need.
  • Access: An asset-based financing program can be easier to obtain than a bank loan.
  • Fewer covenants: As there are less covenants associated with ABL, managing the line and staying compliant is much easier than with a chartered bank.

ABL can also have the added bonus of laying the foundation for other methods of funding.

How can your business obtain ABL?

Your asset-based loan request begins with a detailed assessment to determine the viability of your business and its assets — that is, your collateral. This initial process also includes a thorough field examination of your physical offices to observe things such as your accounting and internal control practices. Why? It’s important for the lender to be able to see the assets that will be used as collateral such as account receivables, inventory and machinery or equipment.

This assessment will include a number of appraisals, such as that of the inventory, to determine the net orderly liquidation value (NOLV) and the market value. Upon completion of all reviews and appraisals, the loan agreement will be created.

Asset-based lending explained: How it works

What determines the rate and terms of ABL?

A number of factors can influence how much money a borrower receives — and at what cost. A lender will generally fund up to 80% of the total accounts receivable, but this can go higher if the accounts receivable is insured.

If inventory is used as an asset, funding is derived from a percentage of the NOLV, cost or market value. Deductions can be made if there is inventory abroad or obsolete stock.

Is my company a good candidates for ABL?

A wide range of industries including manufacturing, wholesale distribution, retail and service companies are often prime candidates for ABL. However, the most important factor is to have asset-rich balance sheets. This demonstrates that a majority of your total assets could be relatively liquid, such as accounts receivable (particularly with creditworthy customers) and inventory.

Lenders look for businesses with strong credit ratings that have deeply-integrated management teams, along with a solid history of operational performance. Many companies who qualify for ABL have a good amount of sales, but for one reason or another, may still not qualify for traditional bank financing.

Next steps: Choosing an ABL partner

Asset-based lending is an relatively common way for businesses experiencing rapid growth to get the funds necessary to fuel that uptick. If ABL is on your radar, be sure to consider the following when evaluating potential partners:

  • Relevant industry experience
  • Length of time in business
  • Availability and customer service
  • Their funding sources

ABL is one of the most flexible tools available for fast-growing businesses that are in search of an alternative to banks. Could asset-based lending be the solution to your cash flow needs? Find out more about ABL today.

 

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Image by ar130405 from Pixabay 

business

Key government financial programs & business aid

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Find out about possible government financial programs and resource options available for your business.

business

It’s no secret that businesses have seen their fair share of changes in the last few months. As owners, C-levels and managers adapt, it’s a good idea to find all the available financial support and resources at hand. While Liquid Capital can provide much-needed cash flow, this can also be a supplement to other resources, including government grants.

At this time, both the American and Canadian governments are providing some different funding options for small and medium-sized businesses. Here’s a list of some of the highlights below.

USA: Government financial programs

america money

1. SBA: Small Business Guidance and Loan Resources

The Small Business Administration has by far the most comprehensive funding resources available when it comes to seeking financial assistance due to the coronavirus. With content available in 17 different languages, it includes coronavirus funding options, guidance for businesses and employers, as well as information on local assistance, SBA products and resources, and government contracting.

2. Paycheck Protection Program

The SBA is also offering a Paycheck Protection Program, which provides a loan to be used towards keeping your employees and workers on the payroll. The SBA will also forgive the loan, granted it is used for payroll, rent, mortgage interest or utilities. Applications can be completed directly from the SBA website.

3. Economic Injury Disaster Loan Emergency Advance

The SBA is also offering this program with loan advances up to $10,000 of economic relief for businesses that are currently experiencing temporary loss of revenue. Additionally, they have recently revised the eligibility criteria to include agricultural businesses.

4. U.S. Chamber of Commerce: Coronavirus Small Business Survival Guide

The U.S. Chamber of Commerce has compiled a list of resources to help small businesses throughout these uncertain times. With content available ranging from general coverage, information on the federal government’s coronavirus stimulus legislation, small business loans, how to manage employees as well as remote work

5. USA Government: Finance your business

The United States Government has compiled a list of funding sources that they are backing including links for small business loans and other government funding options for your business. This is part of their Coronavirus Aid, Relief, and Economic Security Act.

Canada: Government financial programs

canada money

1. Regional Relief and Recovery Fund 

Offered by the Government of Canada, the Regional Relief and Recovery Fund (RRRF), gives businesses located outside of metropolitan areas access to additional financial resources. $675 million of the near $1 Billion total of the fund will be allocated to help support regional economies. Applications can be completed directly from one of the Regional Development Agencies listed on the page.

2. Government of Canada COVID Benefits Quiz

The Government of Canada will be offering a variety of financial services during the coronavirus pandemic, ranging from the individual to small and big businesses alike. To navigate which option is best suited to you this quiz will point you in the right direction.

3. Relief measures for Indigenous businesses

Additionally, the Canadian government has set up a specific relief fund for Indigenous businesses, which includes up to $40,000 for small and medium-sized businesses. The capital is divided with $30,000 as an interest-free loan and a non-repayable contribution of $10,000. Consult the contact information on the dedicated page for more insights on the application process.

4. Canada Enterprise Emergency Funding Corporation: Large Employer Emergency Financing Facility

This fund was specifically set up for large Canadian employers who need financial assistance due to the pandemic, and will provide loans upwards of $60 million. The minimum annual revenue requirement is $300 million or more, however, businesses in the financial sector are excluded from applying. The applications should be completed by emailing LEEFF-CUGE@cdev.gc.ca to register intent. 

5. Canada Mortgage & Housing Corporation: Canada Emergency Commercial Rent Assistance

The CMHC has set up a rent relief program from those who own commercial properties and have small businesses as tenants who have been affected by the coronavirus. Those eligible for the program will be able to acquire forgivable loans if they agree to reduce the rent by 75% for the months of April, May and June, as well as meet operating expenses on commercial properties. Application can be completed directly through the website.

Additional Resources

research

Better Business Bureau

Although not specifically for funding options, the BBB does offer a range of helpful business tips on navigating the pandemic — plus information on price gouging and scam alerts. Additionally, they offer a COVID-19 toolkit for both Canadian and American businesses.

 

Next Up: 6 comparisons between invoice factoring and cash advances

At Liquid Capital, we work with clients who operate businesses in a variety of industries and office structures — whether from busy downtown buildings, the manufacturing floor, on-the-go or from their home office space. We’re business people ourselves, and our company is built on a network of locally owned and operated Principal offices. Whenever you’re talking to Liquid Capital, you’re talking directly to your funding source and a fellow business person.

Images from Pexels, and Pixabay

funding

6 comparisons between invoice factoring and cash advances

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Contrary to what some might think, invoice factoring and cash advances have 6 key differences.

funding

The first thing to consider when looking for financing is to understand why you need the money. Do you need working capital sooner rather than later? Is it a one-time thing or an ongoing need? 

To help you choose, here are six considerations when deciding between invoice factoring and cash advances. (For a description of both options, read part one in this series.) 

1. Purpose of funding: Why do you need the capital? 

You can use the money from both invoice factoring and cash advances for any business expense — whether you need to pay employee salaries, operational or supplier costs, or cover capital costs. Factoring is a good solution for ongoing cash flow problems caused by slow-paying clients because you unlock the money right away without having to go into debt. Some businesses look at cash advances for one-time expenses or projects when they feel stuck, such as new capital purchases — but be warned, the interest costs can add up, causing you to actually pay more than you borrowed! 

2. Application process

application

Both invoice factoring and cash advances have relatively simple application processes, however, they are based on different information. Factoring depends on the current and immediate future state of your accounts receivable, while cash advances depend on your business and credit history. That makes factoring more attractive to many business owners since it’s visible proof of their ability to repay. 

3. Speed of funding

speed

Most factors are funded within a few days for the first invoice, and even faster on future invoices — sometimes within 24 hours! Cash advances are also funded quickly, typically within a few days, but once again, that speedy promise to get the advance also comes with a costly downside. 

4. Cost of funds

cost

Both cash advances and invoice factoring have variable costs because of their different structures. Generally speaking, factoring costs a small percentage of the unpaid invoice. 85% of the value of the invoice is paid immediately, the rest is paid on receipt of payment minus applicable fees. Most factoring options don’t have any origination costs, except for extremely large or

 complex factoring deals, which would be discussed in detail and agreed upon with all parties. 

Tip: always look for clear, transparent terms from any lending provider to avoid unpleasant surprises. Learn other tips here. 

Cash advances, on the other hand, charge significantly higher rates on over the lifetime of the advance, and can even be as high as 40 to 50%.

Additionally, cash advances typically have an origination cost that is charged as a percentage of the total advance amount (usually 1 to 3%). This is on top of the regular interest you’re required to pay every week or month.  These high percentages can cripple a business. 

5. Opportunities for growth

opportunity

Invoice factoring funding is dynamic because it can grow with your business. The more you sell, the more you can borrow. It gives you the immediate ability to borrow more and expand your business. 

Cash advances are fixed loan amounts that are not easily increased since you’ll need to pay off the existing advance and then qualify for a new one. 

6. Availability to new businesses

your business

If your business is still new, invoice factoring is a good option for financing, as it depends more on your client’s history rather than yours. You also won’t need to submit the same amount of paperwork as you would for a cash advance. As a new business, you probably don’t have the tax returns, detailed historical financial statements, expanded business plans, or six months worth of banking statements that a cash advance requires.

Beyond its appeal to newer businesses, invoice factoring is a frequently-used way to support growth for larger, established businesses – it’s not uncommon for companies to factor millions of dollars worth of invoices (see our Recent Fundings). 

 

Ready to increase your regular cash flow? Turn your open invoices into working capital with Liquid Capital’s Invoice Factoring solution. 

 

At Liquid Capital, we work with clients who operate businesses in a variety of industries and office structures — whether from busy downtown buildings, the manufacturing floor, on-the-go or from their home office space. We’re business people ourselves, and our company is built on a network of locally owned and operated Principal offices. Whenever you’re talking to Liquid Capital, you’re talking directly to your funding source and a fellow business person.

Images from Pexels, Pixabay, and Unsplash

home business

5 ways to shift into a home-based business model

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With more companies moving out of the office, here are some tips to shift yours into a home-based business.

home-based business

Gone are the days when remote working was a novelty. Today, working at home is just as normal as getting dressed and going into the office each day. And if you are planning to shift into a home-based business model, you have fewer obstacles than ever. But that doesn’t mean there aren’t challenges along the way. 

Here are five ways to get your home-based business set up and keep the momentum going.

1. Get your finances in order.

When launching any new business strategy, your first task is to ensure that you have the money to operate. But finding extra cash can be difficult, particularly if you’ve lost contracts and have dipped into reserve funds or even personal savings because of the pandemic. But there are ways to get financial assistance. Some organizations such as ZenBusiness, for example, have launched a COVID-19 relief strategy and are offering grants of $1,000 to select businesses. 

Even if you miss out on a grant, there are more options to get working capital. If you have outstanding accounts receivable, for example, you may be able to get financed in as little as 24 hours from our team who can help select the right funding solution.

2. Handle the legal details now.

Legal paperwork

Regardless of what you do or where you’re located, all businesses must be set up with the right legal structure. If you are a freelancer, this may just be something as simple as adding income to your personal tax filing. However, anything more than a solo endeavor will require a legal strategy. 

This might include having a business plan, partnership agreement, or terms of service in place before you get started. In the US, the Small Business Administration further asserts that you’ll need to register your business name, trademarks and domain. This helps protect you from competitors and legitimizes your presence in the business world.

3. Master marketing.

Social media marketing

Marketing may not come naturally to every business owner, but it’s a crucial element when launching and running your operation. Fortunately, thanks to the Internet, there are plenty of places to find relevant information on how to market your business. Optimally, you will identify your target customer and cater to them on their terms. To get you started, you can use a mix of social media marketing, search engine optimization and branding.

Related: 10 ways small business marketers can crush big competitors

4. Grow your team.

Home-based business: Growing a remote team

Think of your business as a garden. Once you have planted the seeds, you can watch it grow. But you can’t do it alone, and you will eventually need to place talent in areas where you may not be the strongest. Hiring remote workers is a smart option and one that will allow you to continue to operate from the comfort of home. But remember to prioritize collaboration and communication. Keep your employees up-to-date with what’s going on by sending out regular updates or collaborating on Slack and similar channels. 

Critical to keep on top of here is salary and payroll. Even though employees are working remotely, it’s important to compensate them fairly so they stay motivated and rewarded for quality work. This also helps reduce turnover, which can increase your overall expenses. HRDirector even notes that a telecommuting employee may bring home around $4,000 more annually than they would in a traditional office setting.

Many business owners can run into challenges making payroll at certain times throughout the year. Liquid Capital financing options can also help you get over these hurdles.

5. Evaluate every day. 

Evaluate data

Any size of business can benefit from performing routine evaluations. Even if you’re comfortable with what you are doing, it never hurts to dig in deep to make sure that your customers are happy and they are capitalizing on all available market opportunities. Routinely ask yourself questions about your direction, available resources and areas where you might improve. Failure to do so can leave you sitting stagnant.

 

To summarize, you have to start with financing. Without capital, it’s going to be exponentially difficult to get up and running. Next, make sure to take care of the legal aspects, learn how to market your business, and grow your team into a supportive organization that can help you move to the next chapter. Finally, never get complacent. Evaluate your business each day, and you’ll have many more opportunities to grow, even when running your company from a home-based office.

 

Next Up: 3 biggest financial challenges facing small business owners

At Liquid Capital, we work with clients who operate businesses in a variety of industries and office structures — whether from busy downtown buildings, the manufacturing floor, on-the-go or from their home office space. We’re business people ourselves, and our company is built on a network of locally owned and operated Principal offices. Whenever you’re talking to Liquid Capital, you’re talking directly to your funding source and a fellow business person.

 

Images from Pexels and Pixabay