5 Biggest Financial Challenges for SMBs

In today’s digital era, with all the workforce-related and technological advancements that occurred during the last decade, it has never been easier to launch a business. However, surviving in the fierce market can pose a pretty hard challenge. And one in every five startups fails within their first business year. The first few years in the life of a small or medium-sized business are often riddled with challenges that people normally don’t face in everyday lives.

The challenges that SMBs face include struggling to get funded, maintaining a positive cash flow, increasing profit, and finding further funding to allow the company to grow. Fortunately, the majority of these issues are fixable. But on the other hand, SMB owners tend to make very bad financial decisions when being pressured to make them. And this leads to failure. We present you with the five biggest financial challenges that small and medium-sized businesses face, as well as tips to help you through the decision-making process while solving them.

1. Product and service pricing

Let assume your business is delivering to your clients and your sales funnel is great. But if you don’t see your bottom line profits growing, you might need to price your offerings better. What affects your ability to set premium prices is your ability to sell. Customers are often willing to pay more when they have confidence and like your company’s services. Some businesses choose to follow their competitors, when it comes to prices. The mistake is that they assume that their competitors are making a profit with their prices, failing to compare their expenses and investments.

Some entrepreneurs believe that they can attract customers and increase the sales volume by setting low prices, letting it affect their bottom line. A low bottom line can make cash flow turn negative, which triggers a whole other set of problems. In reality, customers aren’t necessarily driven off by high prices once you personalize your offerings. Also, make the purchase experience original, and have your customers’ trust.

2. Low profit

Low profit margins can be the result of low prices, as well as too many ongoing costs. Business expenses come in various forms, so it’s hard to detect where your money leaks are. If you spend too much money on one business aspect (for example, expensive equipment or too many staff members), you could dig too big of a hole to get out of.

Profits could also be lowered due to hidden or unseen costs like emergency repairs or inadequate preparation for insurance or tax costs. Or even inconsistent execution, or lack of market awareness. In order to isolate the problem, take these common problems one at a time, and you’ll find out why you’re struggling to generate profit.

3. Late payers

Maintaining a positive cash flow is among the top priorities for every SMB, because cash liquidity is required in order to channel funds into other top priorities. As many SMBs trade with other SMBs, negative cash flow can trigger a domino effect, causing a chain of poor profitability among them. If someone in your supply chain gets into cash flow trouble, becoming unable to pay their bills, their customers’ cash flow gets affected as well. This continues down the line, until the problem reaches you. The more cash flow troubles in the beginning of the supply chain, the bigger the domino effect.

Late payers

To deal with this problem, you should consider changing your policy. Asking for an upfront payment is ideal, nerve-saving, but probably way too bold of a move for many entrepreneurs. This could be a huge setback for many potential clients. Some of the ways for handling this annoying issue is to set a contract with new clients. Clearly define the tempo of payments and don’t forget to mention the consequences of late payments. You can even provide a discount for the regular payers.

4. Financing for growth

Access to funding is what business owners name as one of the most daunting concerns of business leaders when it comes to facing the future of their business. There are various loans and grant programs that exist to help small firms expand their business operations. But when these programs aren’t an option and their credit profiles are bad, a company can face great financial challenges. The ideal solution in these circumstances can be to find a trusted alternative lender.

To gain access to a fund pool to tap into, a company can approach angel investors or venture capitalists. Or get money from online lenders, gather resources through crowdfunding websites, or partner up with another company. With alternative lending sources at your disposal, even if your financial status is far from perfect, you can still get approved for the affordable bad credit loans at a very short notice. All in all, solutions are many, choose wisely and make sure you make the best out of that money.

5. Money management to overcome financial challenges

When cash is flowing to the owner and into the business, money management becomes more important. Managing all the day-to-day finances while operating a business effectively can put a lot of pressure on a small business owner. Many small business owners fear administrative duties, ranging from dealing with invoices, receipts and expenses to tax filing issues.

Money management

Even if you are capable of handling business accounting, once the volume of these duties grows too big for you to handle, it’s usually a good idea to get help from a professional accountant. They will be responsible for filing all the paperwork on time, paying the right amount in taxes. Thus saving you time and allowing you to focus on growing your business.


Small business owners get so immersed in their daily issues and routines that they fail to recognize essential major problems. It’s also easy to feel that your company’s problems are unique. But on the contrary, they’re more common than you might think. Unlike large corporations, small businesses can use being small as an advantage. Being small it makes them more agile and responsive to changing circumstances. After all, these are all financial challenges, not business death sentences. They can be made easier, but not completely avoided. Consider the challenges ahead, know their true size, and take all the steps to overcome them.

Jolene Rutherford
Jolene Rutherford is a writer with a degree in marketing. Interested in media and social media, digital marketing and psychology. Currently writing for BizzMark Blog. Follow her on Twitter.
Jolene Rutherford

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