There are distinct pluses and minuses that small business owners should consider when looking for a loan.

New small business owners typically enter the marketplace with high expectations — they want to build sales and increase profits quarter to quarter. More often than not, they hope to add employees and, perhaps, open up additional locations. To help turn their dreams of growth into reality, they often seek out financing.

The big question is when to borrow money and on what terms. The decision isn’t always clear-cut, as there are distinct pluses and minuses that small business owners should consider.

The Pluses of Business Borrowing…

Seeking financing can make sense from a business perspective if the loan is intended to help the business expand and grow. For example, using debt to add to or introduce a new line of products, acquire additional property, or take other actions that are expected to boost revenues is an appropriate business strategy. A loan can also make sense when it is used to repay the owner of the business some of what he or she put into the business using personal funds.

…And the Minuses

A business loan impacts cash flow as it is being repaid, often in monthly installments. The interest cost may be an important consideration, depending on the interest rate environment. Business borrowers should understand that their tax deduction for interest expense may be limited to 30% of the business’s adjusted taxable income. However, smaller businesses may be permitted to deduct more. A tax professional can provide details on these rules.

Excessive Debt

Business owners also need to consider other possible negative ramifications from taking on excessive debt. For example, the owner of a small business is typically required to personally guarantee loans to the business. If the business defaults on the loan, then the owner is personally liable for repaying the loan balance. It is possible that in such a situation, the lender would take steps to seize the owner’s auto, home, and other assets in order to settle the debt. Moreover, if the business ended up with more liabilities than assets and was unable to repay what it owed, then the business might be forced to file for bankruptcy.

Seek Professional Input

Before taking on debt, small business owners may want to consult with an experienced financial professional. A professional analysis of the business’s financial health, cash flow, and prospects can help the owner determine whether a business loan at this stage makes sense and how much debt the business can afford to take on.

Running a small business isn’t easy. You probably wouldn’t have it any other way. The ability to survive and thrive is a source of great pride for small business owners. So when a competitor moves in, especially a big one, it can feel like battle lines have been drawn.

Sharpen Your Edge

Before you do anything, accept the fact that you can’t compete on the same level as a large national chain. But that doesn’t mean you can’t win the battle. Study what the competition does and how they do it. Then use that information to define — and sharpen — your company’s competitive edge.

A large competitor will almost certainly have lower prices and a deeper inventory. But you can connect with customers in ways the competition can’t. You can add value to every customer interaction by being attentive and providing expertise and personalized service.

Perhaps your biggest edge is your size. Being small means you can respond to market trends and customer requests more quickly. You can also change and adapt policies and procedures faster.

Rally the Troops

You have another big advantage: You have an established customer base and you know what they need. Establish a timeline to reach out to your customers directly via snail mail or e-mail (or both) with special offers. If you have a loyalty program, consider doubling rewards for a period of time that overlaps with the competition’s opening.

Look for Advantages

Having a big competitor move in may have some unexpected benefits. The new company validates the need for what your business offers and may do a fair amount of advertising. If your marketing budget allows, this could be a good time to do some strategic advertising of your own.

The competition also may create some unexpected opportunities in the future. The new company will change the dynamics of the marketplace, which may lead you to steer your business in a new direction.

Fire, floods, hurricanes, earthquakes. When they happen, they can destroy buildings, equipment, and hard-to-replace data, and even injure or kill employees. It can take a business weeks, sometimes months, to resume operations after a disaster. Some businesses never recover. You can’t pin down the time or day when a disaster may strike your business. However, you can certainly prepare for one. Preparing for a disaster can minimize the potential damage and may protect you and your employees from harm.

Knowing what to do if a disaster strikes your business is half the battle. Savvy business owners draw up a disaster plan and update it regularly. They consult with experts and draw on lessons learned from the past. Moreover, they designate alternate business sites, emphasize data preservation, and ensure that the business’ insurance coverage is sufficient.

Drawing Up a Disaster Plan

If your business does not already have a disaster plan, now may be a very good time to develop one. Consider forming a disaster planning committee and assign it the task of crafting and implementing a disaster plan for your business. Give committee members the opportunity to attend seminars, meet with experts, and take training courses related to disaster planning.

If your disaster plan is to have any value at all, it must, at a minimum, outline in detail all of the steps managers and employees need to take if disaster hits your business. An effective and workable disaster plan should cover personnel safety and management succession.

Personnel Safety and Management Succession

An effective disaster plan should clearly identify safety areas for employees as well as an evacuation route. Specific individuals should be responsible for confirming that all employees have reached the safety area. The plan should outline a chain of command, indicating the responsibilities and duties assigned to each manager or employee during a disaster.

A list of emergency phone numbers — hospitals, doctors’ offices, and the company’s lawyers and accountants — is an important part of the plan. Be sure to include the home phone numbers of employees and the names of family members who can be contacted in an emergency.

Ensuring management continuity after a disaster should also be a top priority. That requires establishing procedures that detail the responsibilities and duties of each member of the management team in the days and weeks after a disaster. The procedures should clearly define a line of succession and give instructions on how to communicate any changes or information to employees, customers, vendors, and professional advisors. Creating and implementing these procedures helps keep your business operational during a difficult time.

Alternate Business Sites

Getting your business up and running after a disaster is much easier if you have an off-site facility for storing backed-up data vital to your operations. You’ll need to be able to access customer and vendor lists, accounts receivable records, and other critical records if you are to resume operations quickly. Make sure you identify and classify corporate data according to its importance and begin to back it up as soon as possible.

It may be worthwhile to look into alternate business sites, essentially office complexes with computers, work areas, and phones. When disaster strikes, you would move your personnel to the alternate site.

Insurance Coverage

Review your business insurance policies to identify any potential shortcomings in your coverage. Business interruption insurance, which compensates a business for the loss of all or a portion of operating income when normal operations are disrupted by disaster, is a key element in business insurance planning. Take the time to periodically reexamine your business’ umbrella liability, fire, vehicle, and property insurance. Keep several copies of all your policies at different locations.

Don’t Let Your Plan Gather Dust

Make sure key employees receive a copy of the disaster plan. Keep it updated. Practice emergency drills. A proactive approach can potentially minimize the impact of a disaster.

Whether or not the number of people working from office buildings returns to pre-COVID levels, one thing appears certain: Remote and hybrid work models are here to stay. Business owners and other managers who rely on individuals who are working remotely full- or part-time are refining and elevating their management skills so that they get the best out of their employees.

While managing remote and hybrid workers bears many similarities to managing fixed-base teams, it also has some unique aspects. Here are several best practices you may want to consider and apply to your own situation, no matter your level of experience in prior management of remote workers.

Make Your Expectations Clear and Simple

Clarify the hours when employees should be available and accessible. Give employees performance goals and metrics that define success in meeting those goals. Lay out clear guidelines when it comes to after-hours work-related emails and text messages. You want employees to maintain a healthy work-life balance, one that prevents burnout, and ultimately, keeps them working at peak capacity for your business.

Communicate Regularly

Employees want to know how they are performing and whether they are on track to meet the goals you set for them. Check in regularly with them and communicate your satisfaction or your concerns about how they are doing. Regular check-ins are important; just be aware that you can overdo it, since too much oversight may be resented by employees who feel they are not trusted. It’s important to keep them in the loop about any changes in company policy when it comes to wages, benefits, job openings, promotion opportunities, and other changes that may impact them.

Depending on the demographic makeup of your remote employees, you may have to refine your communication style. Talk with your employees and solicit their opinions on what works best for them — texts, Zoom calls, or other forms of instant messaging.

Listen Attentively

Closely related to good communication skills is the ability to listen carefully and attentively to what your employees are saying. You want to give them the opportunity to express what they think about their workloads and talk about any stresses or frustrations they may be feeling. When you listen carefully to what your employees are saying, you are communicating trust and respect.

Build a Sense of Community

Some workers thrive in environments where they can interact and engage with fellow workers face-to-face. That engagement is less important to other workers. One of your goals managing a remote workforce should be to build connections to workers who feel isolated and out of the loop. Employees who feel this way typically do not perform at their highest level. By staying in touch and by organizing the occasional virtual — or in-person — get together in which you build connections and a shared sense of purpose with employees, you can create a sense of community that can have a positive impact on employees and their level of engagement.

Embrace Flexibility

A rigid approach to managing your remote employees may be limiting and not as effective as a more flexible approach. For example, once you determine that the work is being completed on time and is of a high quality, you may want to give employees some leeway as to the specific times they are working.

The work world has changed in numerous ways over the past couple of years. Your management approach has to stay ahead of these changes, especially when it comes to remote work, if your business is to continue to grow and thrive.

Like many small business owners, you may plan on working until you are ready to retire. And, once you reach that point, you may expect to sell your business and live off the proceeds. Or, you may have partners or children who can keep the business operating once you are ready to step away.

However, smart business owners plan for all eventualities. They plan for success but they have a fallback plan in case their efforts don’t bear fruit. As a business owner whose business is probably by far your biggest asset, it makes sense to think about those things that could go wrong and take steps to protect yourself now.

What steps should you consider taking that can protect your future financial security? Consider these contingency strategies:

Put a Retirement Plan in Place

The only constant in business is change. And many changes can harm a business’s financial viability. What would happen to your retirement dreams if your business experienced a serious setback? New technologies come along and make some businesses obsolete. New competitors erase older, established firms and economic downturns impact consumer and business spending. Natural disasters can seriously damage a business’s operations and cause widespread financial loss.

Funding a retirement plan during your working years can help protect your future financial well-being. Additionally, a retirement plan can provide important tax benefits. For example, your contributions to your retirement plan are typically tax deductible while earnings on investments in your retirement plan account grow tax deferred until you begin taking distributions.

As a small business owner, you can choose from a variety of tax-advantaged retirement plans. Each option has distinct advantages and disadvantages when it comes to costs and the burden involved in plan administration. The input from your financial professional can be helpful when reviewing the appropriateness of a particular retirement plan with regard to your business’s specific situation.

Establish a Buy-Sell Agreement

If you have one or more partners or co-owners, it makes sense to have a buy-sell agreement. A buy-sell agreement helps ensure that you (or your beneficiaries) will receive fair compensation for your ownership interest. The agreement also facilitates the orderly transfer of ownership and management. A buy-sell agreement can be drafted among shareholders of an S corporation, partners of a partnership or an LLC, or even between an owner and a key employee.

When carefully crafted, a buy-sell agreement can:

• Help provide a smooth transition of control, management, and ownership to those who wish to continue running the business
• Spell out the financial aspects of the transition
• Establish a fair and reasonable price
• Help ensure the financial security of your family and other beneficiaries in the event of your unexpected death
• Create a built-in buyer for your interest in the business
• Establish, under certain circumstances, an estate tax value for the stock.

There are two basic types of buy-sell agreements: cross purchase and entity purchase (stock redemption). With a cross purchase agreement, the remaining owners agree to buy the departing owner’s interest in the business individually. With an entity purchase agreement, the business itself agrees to buy the selling partner’s ownership interest.

Life insurance is a common way of funding a buy-sell agreement. The proceeds of the policy are used to buy out the departing owner’s interest in the business.

Develop a Disaster Plan

No matter where your business is located, it is a wise precaution to assume that a natural disaster will impact it at some point. Adequate preparation can minimize damage to your systems, your equipment, and your physical plant, and may even protect you and your employees from harm. A key component in preparing for a natural disaster is a disaster plan.

Your disaster plan should include sections on personnel safety, management succession, and data preservation. It should outline the steps employees and managers must take in the event of a disaster.