Being Prepared

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Small businesses may be prepared for short-term financial fluctuations, but many lack the capital to sustain long-term operations, according to the recent TD Bank Financial Preparedness Survey: Small Business Owners' Report. Although the survey found that nearly all business owners (94 percent) considered their company financially prepared for the next 12 to 18 months, further results suggested that owners may not be as ready for the future as they think.

The survey revealed that nearly three-fourths of SBOs (72 percent) believed their business could endure revenue shortfalls for just two quarters or less before concerns about the future arose. Forty-three percent said their business would not survive a revenue decline lasting three to four quarters. Furthermore, only 19 percent of SBOs surveyed had emergency savings that would last more than six months.

South Carolina’s pro-business climate, paired with the state’s continued post-pandemic economic boom, has resulted in healthy conditions for many small businesses. Still, there are continued economic pressures including concerns around interest rates, inflation and other factors, which serve as a reminder that no business can be too prepared for the future.

Wilma Neal Garren is founder of Joseph H. Neal Health Collaborative (JHN), a nonprofit located in Cayce, South Carolina, and a TD Bank customer. The organization has statewide operations focused on advancing healthcare in all communities by providing free, confidential services to underserved communities.

Currently in its seventh year of operation, JHN has navigated a range of challenges related to financial planning and emergency preparedness, including the Covid-19 pandemic, a changing regulatory landscape, securing a new facility amid an oversaturated real estate market, and overcoming events such as unexpected property damages.

Garren found the survey findings resonated with her experience operating the community-rooted nonprofit.

“Many small business owners overestimate their level of preparedness because they believe they are doing everything necessary — until an unforeseen challenge exposes the limits of that preparation,” said Garren. “The nonprofit funding environment, which can be impacted by delays in grant disbursements, requires emergency planning. We’ve learned through direct experience that financial resilience requires both strategic foresight and a realistic assessment of potential disruptions.”

Garren shared details about a lesson learned several years ago when a major grant was delayed for six months, causing an immediate funding shortfall. This experience underscored the need for structured financial safeguards, such as an emergency capital reserve and business line of credit to maintain operations, a critical part of sustaining any business through lean times.

“Part of making sure we have adequate funds is figuring out our financial strategy, including our setback and emergency funds,” Garren said. “Simply put, what percentage will we need for that particular situation?”

Garren also noted the importance of establishing core processes to support short- and long-term business goals.

“JHN has taken deliberate steps to build financial preparedness, including monthly cash flow reviews, quarterly reconciliations and realignment of budget allocations based on operational trends,” she said.

“TD Bank has been a vital part of this process, providing a line of credit and products such as 90-day CDs and money market accounts to maximize interest. Their flexibility and responsiveness have given us peace of mind and allowed us to operate without compromising our mission, even during financial strain.”

Additional survey results revealed that 46 percent of respondents turn to a bank or other financial provider and slightly fewer consult other small business owners (45 percent) for advice to become financially prepared. As leaders like Garren continue to address their own financial preparedness, trusted bankers are an essential part of planning for the future, especially given myriad unknowns.

While small business owners remain an optimistic and resilient group, they should not have to face uncertain times alone. Having a network of trusted professionals who can offer guidance amid shifting economies will enable owners to respond swiftly as they plan for the future. As their resilience is tested in the months ahead, preparation will make all the difference.

Chris Ward is regional president of the Mid-South Metro for TD Bank, which includes the state of South Carolina. He has more than 30 years’ experience in retail banking, commercial lending, consumer and home equity lending, and credit management. The Financial Preparedness Survey was conducted in March, gathering insights from 1,000 SBOs nationally, with 100 or fewer employees and annual revenues exceeding $100,000.