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Alternative Finance Can Reduce the Risk of Small Business Failure

While it is a common belief that many small businesses fail in their first year, according to the Small Business Administration Office of Advocacy, that simply isn’t the case. Their 2018 Frequently Asked Questions contains numerous detailed statistics involving small business success and failure but the bottom line is that about 80% of them survive the first year. That figure declines as businesses reach the five and ten-year mark. About 50% stay in business for more than five years and only about one third are still in business beyond their 10 year anniversary. While there are a variety of factors contributing to small business failure, alternative finance can provide the capital needed to avoid some of the most common reasons small businesses close up shop.

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Identifying Market Demand

This is one of the biggest reasons for small business failure. Some business owners will launch a new product or service without first researching if there is a need for it. Others will build their entire business model without first determining if there is sufficient market demand for what they are offering. In many cases, this happens because there is limited working capital, forcing business owners to choose between making the investment to research the market demand or just forging blindly ahead. No amount of working capital can sustain a business that doesn’t have a solid market. However, there are alternative finance options that can provide the capital necessary for proper market research to effectively expand offerings and promote business growth.

Inadequate Management

Often with a small business, the owner is a management team of one with only a minimal workforce to oversee. As the business grows, so does the workforce. Management must ensure that applicants are vetted properly, only qualified candidates are hired, thorough training is provided and that the workforce is properly supervised. 

Although the business owner had the skills and knowledge to create an initially successful business, they may not have the strong management skills necessary to sustain that success. It can become necessary for the owner to invest in business coaching or training to develop proficient management skills or hire another management level staff member to handle these responsibilities. Whichever path the business owner takes, it’s important to invest both the time and money into ensuring the perfect manager or management team is put into place. If a lack of funding is keeping that from happening, alternative finance could be the perfect solution.

Marketing Deficiencies

In today’s digital marketplace, effective marketing is more important than ever to make sure your business stands out among your competitors. Many business owners lack the time and the skills to do the reach necessary to reach and connect with the right audience. Outsourcing a business’ marketing is an expense many business owners fail to establish a realistic budget for and as a result, their marketing efforts fall short. Cutting corners when it comes to marketing will almost certainly put your business on the path to failure. There are alternative finance options that can help fund effective marketing campaigns to keep your business on the road to success. 

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Alternative Finance Can Provide Consistent Cash Flow

Having a consistent reliable cash flow is key to avoiding these and other factors that could cause small business failure. Most small businesses experience working capital shortages from time to time that can leave them vulnerable. Alternative finance can provide quick, short term cash flow solutions to keep your business moving forward.  

 CapFlow Funding Group is dedicated to providing the short-term working capital you need to keep your business growing. We will work with you to find the best funding solution for your business. While CapFlow Funding Group specializes in factoring, we can also connect our clients with other alternative financing options that may be better suited to their business needs. We service many different industries with a variety of different funding needs. Contact us today and find out how invoice factoring can help grow your small business.


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