Every business has its ups and downs. But occasionally, your cash flow will take a dive that you did not expect.[1] It might be a seasonal decline in sales, a new competitor, or any number of variables, many of which you cannot possibly identify. If today is not the day to throw in the towel for you, how do you survive a sudden sharp decline in income?
Personal Loan
Depending on how much money, and how badly you need it, you may be able to survive with a temporary personal loan. Personal loans have the advantage of being based on trust earned by a friendship or family relationship.[2] The disadvantage with personal loans is that personal relationship is at stake in the event you fail to repay. It is important to be sure that the terms of the loan are thoroughly discussed and decided mutually in writing before you go through with it.
Bank Loan
A bank loan or line of credit may be an option for you, but these can be difficult to obtain.
Typically, banks will require:
- three years’ worth of tax returns,
- a cash flow statement,
- profit and loss statement,
- balance sheet, and
- perhaps other financial reports.
- They may also require submission of a business plan.
You are in need now may be because you do not have sufficient systems in place to monitor your finances. If this is the case, it would also be difficult to produce the documentation you need to get the loan.
Credit Card
Credit cards may be a good option for you because they are easy to obtain and receive approval for, but beware! Interest rates can be as high as 30-40%, especially if you fail to make payments timely or if you have bad credit. You will definitely want to pay them back as soon as possible to avoid losing more money on interest. You can expect to be approved for something like 5% of your annual receipts.
As a final thought, not being able to pay your bills is awful. If you have a conscience, it will be upset with you for failing to make enough to pay your bills. You may suffer through feelings like embarrassment, shame and regret. If you want to avoid this horrible experience again, remember this moment and next time, save up enough money to cover those months when your cash flow is low.
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