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In recent months, inflation has become a pressing concern for small businesses. Forbes reports that 1 in 3 small business owners cite inflation as their top business concern. The prices of goods and services have increased almost 9% (March 2022, year over year comparison) while prices paid by wholesalers rose just above 11% over the same time period, according to CNBC. As the cost of goods and services continues to rise above standard levels, profit margins are being squeezed. This is particularly challenging for businesses that operate on tight budgets and don't have much room for error.
In this post, we'll explore how inflation can impact your business and what measures you can take to manage your finances during times of inflation. So, if you're a small business owner looking for strategies to help you stay afloat during these tough times, read on!
Inflation is defined as a dip in the purchasing power of currency during a specific period, despite being generally associated with Demand-Pull inflation in which consumers experience an increase in prices when the demand for goods and services outpaces the supply. Either way, inflation can have a major impact on small businesses as it can erode profit margins and make it difficult to maintain affordable prices for customers.
There are numerous ways that inflation can impact your small business. For example, if you sell products that are subject to inflation, you may find it difficult to maintain your profit margin. In addition, if your customers are feeling the squeeze of inflation, they may be less likely to patronize your business. Finally, if you have loans or other debts that are linked to inflation, your monthly payments could increase, putting further strain on your finances.
Inflation can also make it difficult for small businesses to access the working capital they need to grow and invest in new products or services, whether in the form of credit or alternative financing. This is because lenders often raise interest rates in response to inflation, making it more expensive for businesses to borrow money.
There are a few key things to keep in mind if you decide to raise prices due to inflationary pressures.
If you're a small business owner, you may be wondering how to protect your small business from the impact of inflationary pressures. Here are four tips:
One way that small businesses can combat inflation is by using embedded finance tools and services. Embedded finance refers to the integration of financial products and services into everyday devices and platforms. Whether its paying for a ride share service, connecting your bank account to your favorite online retailer or using a mobile wallet to complete a purchase, embedded finance makes it easier for merchants and customers to access essential financial services in a quick and frictionless manner. The innumerable benefits can help small business owners save money on transaction fees and interest payments, as well as improve customer satisfaction with discounts or rewards to customers who use their financial products and services.
If you're a small business owner who needs up to $350,000 in working capital, and prefer to not worry about putting up valuable assets as collateral then Fundomate's small business funding program may be a viable solution for you. The process is not only quick and easy but offers attractive advantages:
Does your organization provides services to a network or merchants? You can improve your merchant engagement and increase revenues by offering automated financing and real-time banking tools that help them manage, optimize, and grow their business during inflation. Fundomate allows partners to become the Original Equipment Manufacturer (OEM) for our merchant Financial Operational System. By partnering with us, merchant-facing businesses can rapidly launch financing and real-time banking services that boost loyalty and create new revenue streams with minimal investment and effort. Click here to learn more.
In the long run, small businesses that adopt embedded finance will be better positioned to survive and thrive in an inflationary environment. By making it easier for their customers to access essential financial services, they can help them save money and improve their overall financial well-being. In turn, this can lead to higher levels of customer loyalty and more repeat business.
While there are a number of ways to protect your small business from inflation, it is important to remember that no one solution is perfect. Inflation is a complex economic phenomenon and its effects can vary depending on the specific industry and market conditions. As a result, it is important to stay up-to-date on the latest inflation data and news so that you can adjust your strategies accordingly.
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Embedded finance is a relatively new form of financing that's been gaining in popularity among small business owners in recent years, but what is it?