Inflation is currently at a 40-year high, resulting in raised operating expenses and lowered purchasing power for small business owners.
Although inflation can’t be stopped, it can certainly be mitigated by making smart financial decisions today. One way that businesses can do this is through financing options like loans or leases for their capital purchases such as equipment or vehicles. In fact, in a recent survey by the U.S. Chamber of Commerce, almost half (45%) of businesses have obtained finance to manage the resulting higher costs.
In this guide, we look at some of the options available to help you mitigate the impact of inflation on your business.
What is Inflation and How Does it Impact Small Business Operations?
Inflation is the increase in the general price level of goods and services in an economy over a period of time.
It negatively impacts small businesses in a number of ways. Firstly, increased costs can impact a company’s profitability. Additionally, it can create a reduced demand for a business’s products or services. This, in turn, can impact cash flow, as customers may defer purchases due to higher prices or choose to buy less expensive products instead of more expensive ones. Finally, inflation can also make it more expensive for businesses to purchase goods and services. A higher general price level means that the same amount of money won’t go as far and may even be worth less than before.
Small Business Finance Options for Mitigating the Impact of Inflation
Depending on how long this present inflationary phase lasts, you may not require something long-term, such as an SBA loan. Therefore, we’ve rounded up four of the most flexible, short-term financing options for you to consider.
Merchant Cash Advance (MCA)
A merchant cash advance (MCA) is a short-term financing option for small businesses that allows a borrower to receive an advance on their business’s future credit or debit card sales. It enables you to receive funds quickly—often in as little as 24 hours.
A merchant cash advance helps your business mitigate the impact of inflation by giving you access to capital when needed. This means that you don’t have to pay as much in interest rates over time, which is a significant benefit when trying to maintain steady growth.
Short-Term Business Loan
Short-term business loans are a great way for small businesses to deal with the impact of inflation, especially if your business is in need of cash in the short term. The loan can be used for almost any purpose, and it usually has a repayment period that is shorter than one year.
There are many financial institutions that offer short-term business loans, some of which include banks, credit unions, and online lenders. However, if you need the funds sooner, rather than later, it is important to find a lender that understands the needs of small businesses and offers flexible terms. This is why an online lender, like Zinch, should be your first port of call.
Our short-term loans don’t just offer flexible terms, but also fixed payments. This means the number of payments and amounts are established from the onset, allowing you to budget and plan ahead.
Business Credit Cards
A business credit card is a simple and effective way to manage cash flow in your business. It can help you keep track of expenses, which allows you to make better decisions about where money should be allocated throughout the year.
This helps mitigate the impact of inflation, as it allows you to pay for things upfront instead of waiting until later when prices might be higher.
Line of Credit (LOC)
A line of credit can provide a larger amount of financing than most other small business loans, which can be useful if your company has cyclical sales or needs more capital than what traditional banks offer.
These are often unsecured loans based on your personal credibility and experience with other financial institutions. However, they do require additional paperwork such as income statements and balance sheets for a lender to determine how much risk they’ll need to take on to give you a loan.
Need Small Business Financing to Help Combat Rising Inflation?
Inflation has a significant impact on a company’s bottom line. Fortunately, there are ways to mitigate the effects of inflation with the right financing option. Doing so can protect your company from the rising costs of doing business, while also allowing you to grow your business—and profits—over time.
Contact us at (714) 500-6622 to learn more about your options. You could qualify for up to $250,000 in just 24 hours.
