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Access to operating capital

It’s crucial to communicate with your team about your financial needs. When it comes to accessing operating capital for small businesses, there are various requirements.

Typically, an infusion of capital is necessary, and the challenge lies in securing access to it. Traditional institutions like banks, loans, and credit cards are options, along with small business loans and grants for specific types of work. However, regardless of the method, investors will want to understand your cash inflows and outflows for effective cash flow forecasting.

The duration of forecasting depends on your business and can vary, but typically looking 36 months ahead is advisable. Cash flow forecasting entails considering not only goods and services but also factors like salaries, fixed assets, loan repayment, and the overall financial health of your business. While having a single investor in your small business would be ideal, it’s often not the case.

Different investors with varying levels of equity and involvement may come into play, so having a financial team, including a CPA, is invaluable. Your CPA can guide you toward the best investment options aligned with your long-term goals as a small business owner.

Some entrepreneurs aim to continue and grow their small businesses, while others intend to build and sell. The extent of equity others hold in your company will depend on your long-term goals, and a CPA can help you make informed decisions. When considering investment options, it’s essential to explore traditional lines of credit, loans, and credit cards for short-term cash infusions. These can be helpful if there’s a positive cash flow outlook in the near term. For substantial and long-term investments, an angel investor might be sought. However, partnering with an angel investor means involving other individuals in your business’s functions and direction, which can have both positive and negative implications.

A CPA can provide valuable guidance through this process, drawing on their experience with other small businesses. Remember, when seeking investments, investors will assess your personal credit and financial history, so it’s crucial to organize your finances and make any necessary adjustments beforehand.

A CPA can help you analyze your financial situation and ensure everything is in order before pursuing additional funding.