Should I Get Small Business Financing During a Pandemic?
The global pandemic has changed the landscape of many aspects of life, society, and the economy. Statistics Canada reported a contraction in the Canadian economy by 11.6% in April 2020, after a 7.5% drop in March. Overall economic activity was about 5% below pre-pandemic levels in February.
While most businesses in Canada were impacted by pandemic conditions and restrictions, small businesses in particular were hit hard. Small businesses were more likely to experience a decrease in revenue and have less liquidity to operate. Given that small businesses make up 98% of all employer businesses in Canada, it’s important to support small businesses through the rest of the pandemic and into recovery.
One option for financial support is small business financing. More accessible and flexible than traditional lending, small business financing offers a number of solutions depending on the business’s needs.
What is Small Business Financing and Why Does it Matter?
Small businesses often have a hard time accessing lending options from banks and traditional lenders. Alternative lending has risen in its place, a viable option for businesses seeking additional funds without the hassle. Small business financing, such as that offered by Merchant Growth, lends against cash flow and sales, as opposed to asset-based lending by banks, which can lend against real estate, inventory, and accounts receivable.
Small business financing typically utilizes technology to provide sleek and modern operations, offering a range of products to suit the diverse needs of small businesses, and can become trusted partners over the lifetime of a business.
Why Get Financing During a Pandemic?
Small businesses can face a number of challenges even during pre-pandemic conditions. With costs like rent, payroll, and utilities, business owners often find themselves without enough liquid cash. With the pandemic causing a decrease in revenue, these challenges can become exacerbated.
In order for small businesses to stay afloat during the pandemic, access to capital and maximization of liquidity are important. Many of the federal assistance programs aim to help businesses do this by providing funds to cover operating costs and generating cash flow. Wage subsidy programs allow business owners to retain staff and avoid mass layoffs while saving on the cost of payroll.
Aside from addressing capital needs, Neil Thompson, Head of Underwriting at Merchant Growth, also suggests small businesses look into unique opportunities that may arise during the pandemic. That includes inventory discounts and shifting business models to online operations or to a delivery model. In particular, businesses that stand to grow despite the pandemic, such as Cannabis retailers, or because of the pandemic, such as e-commerce businesses, would benefit from small business financing.
Whether it’s to bridge the gap that federal assistance isn’t able to cover, or to explore options to adapt and grow, small business financing can provide unique solutions for business owners.
What Makes Effective Financing?
The Harvard Business Review highlights the need for banks and policymakers to emphasize a streamlined process to get money to businesses quickly and efficiently. Their research also suggests that active outreach and relationship-building are more important for small businesses than simply responding to inbound requests.
At Merchant Growth, we pride ourselves in being Canada’s most convenient and accessible financing experience. When the pandemic first hit small businesses, our Support team reached out to existing clients to inform them of federal assistance programs. We actively worked with clients to gauge how their business has been impacted by the pandemic and made adjustments to their repayment schedule accordingly. As a result, we were able to help 651 customers with payment reductions, easing their burden until revenue returned to more regular levels.
The Path Forward
It’s clear that small businesses have been significantly impacted by the global pandemic. Revenue decrease, reduction in hours, and layoff of staff have all affected not only the businesses themselves but also their owners and valued employees.
While traditional lending and federal assistance can, and have, staunched the bleeding, alternative small business financing can go a step further to speed up the recovery. These solutions utilize technology, understanding of the market and client needs, and proactive customer service to provide business owners the most comprehensive support they need. So that businesses can go further than simply hanging on, but also take this multifaceted challenge as a way to innovate and grow.
Merchant Growth is dedicated to helping small businesses do just that. Our online application is simple and straightforward, and upon completion a sales representative will be in touch about the next steps. Financing is available within 24 to 48 hours. We look forward to working with you to overcome your challenges and become a trusted partner through the rest of your pandemic journey and well beyond.