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For many business owners, running a successful business requires balancing growth aspirations and financial reality during the best of circumstances. In today’s volatile economy rife with challenges, business owners have shown remarkable resilience. A key ingredient to making that hope come alive with financial success is having access to capital.

Today's Small Business Challenges

Businesses are currently facing historic headwinds, including:

1. Interest rate hikes: With the Fed continually raising interest rates, the market has become even more volatile, which makes it hard to make commitments for banks and business owners alike. It also costs more to borrow money, which can be a difficult hurdle to clear for many small business owners.

2. Staffing shortages: Hiring and retaining employees has been a top challenge for organizations of every size. As companies compete for talent, many have been offering signing bonuses or increasing wages—measures that can be challenging for a small business with narrow margins.

3. Supply chain lags: Supply and labor shortages are compounding. For small businesses, it costs money to carry inventory. To meet customer demand and deliver on time, they will likely need to order inventory sooner to contend with extreme shipping delays.

4. Inflation: Smaller companies’ profits are being crunched by larger companies with more leverage to negotiate pricing. Combine inflation with supply chain shortages and it’s an exponential use of working capital to hold more—and more expensive—inventory.

5. Property tax increases: Business owners are affected directly and indirectly by property tax increases, depending on whether the company owns or leases its building, and how long the rent is locked in. Rents, especially for storefronts, will eventually go up to cover tax increases.

Why Working Capital Is Critical for Small Businesses

All these challenges point to a harsh reality: It’s more expensive to run a business today than at nearly any other time in history. Whether facing higher borrowing costs, higher employee retention costs, higher production costs, longer lead times or potential rent increases, a business needs access to working capital.

Simply put, working capital is the cash a business has in its accounts, plus what it is owed (accounts receivable), plus inventory—then minus bills that are due. A healthy business will demonstrate positive working capital, but might not have cash because it’s waiting to sell inventory or collect payments.

If business owners have access to working capital early, they can time inventory purchases to get better prices, ensure there is never a payroll crunch, and capitalize on any new opportunities in the market.

working capital graphic

A Strong Local Ecosystem Can Help Small Businesses Succeed

Supporting local businesses takes a concerted effort from government, financial institutions and local economic development groups, but it’s well worth the effort. At Byline, we view our role of supporting business owners as mission-critical—it’s a big part of who we are as a financial institution.

In this challenging economic environment, business owners need experienced advisors to plan and finance operations and growth. They should work with bankers and institutions that are local and can make decisions nimbly.

Supporting vital local businesses is a community effort. Byline partners with microlenders, government organizations, and other outlets and supports funding for local chambers of commerce. One such organization is the Small Business Advocacy Council, which lobbies for legislative backing for hiring, retraining, childcare and other programs to address issues facing the small business owner in Illinois.

Together, banks, community organizations, business owners and state and federal agencies can create a supportive environment for businesses to thrive.

By Stephen Ball, Senior Vice President, Head of Business Banking at Byline Bank and
Scott Baskin, CEO of the Small Business Advocacy Council

Your business moves fast. So does our financing. Byline Express Loans can help your business grow with loans and lines of credit from $10,000 to $500,000. Learn more by reaching out to a Byline business banker today.