With many small business owners hurting amidst the Coronavirus pandemic, cash flow is a hot topic. If you’ve already read our article about improving your cash flow but are looking for help to decide what avenue to take, this is the blog post for you.

Waiting Out Your Paycheck Protection Loan Application

Many small business owners are looking to the Small Business Administration and its Paycheck Protection Loan program to help in these uncertain times. Unfortunately, even if you qualified for a PPP loan, your application may be in review for longer than anticipated as the SBA struggles to cope with the number of businesses who have applied. Still, since PPP loans are forgivable if certain requirements are met, waiting for your application to be processed may sound like an appealing option. For more information on the Paycheck Protection Program, please read our article here.

Your Bank

If you have a good relationship with your bank and a solid credit history, taking out a business loan is one of the easiest avenues to improve your cash flow. 

Online Lenders

If a traditional bank is not the right choice for your business, you may want to look into online lenders. Revisit our article “The Best Funding Options for Women-led Small Businesses” to learn about the different requirements to get a loan from companies like FundingCircle, OnDeck, FundNation, BlueVine, OpportunityFund, and Kabbage, many of which offer loan options for any business owner who qualifies, regardless of gender.

Factoring Companies

According to The Hartford Small Biz Ahead, factoring companies may be a good option for businesses whose customers are paying their invoices more slowly (or worse, not at all) due to the pandemic. Factoring companies can take the work out of chasing down payments by paying you a percentage (usually 85-90%) of your invoice upfront. After they collect, they give you the remainder of the invoice payment, less their fees, which can be up to 2% for the first month and 0.5% more for every 10 days after that. The pros of this include the quick cash influx, the lessening of your workload, and the ability to cherry-pick which invoices you would like to have them collect. However, keep in mind that their fees make a dent in your profit, and sending a third party to collect payments from your customers or clients may damage your relationships.

Friends and Family

In a pinch, sourcing funding from friends and family could save your venture. While mixing personal and professional can be a tricky business, if you’re confident you can repay the loan, you may be able to work out a deal that benefits both parties. Your “investors” likely already believe in you and your business and have an emotional stake in your success, so you may be able to get more flexible terms with this type of borrowing. In return, you can offer interest on your payments that exceeds the amount your lender’s money would make in a savings account. Proceed cautiously and remember to protect your relationship by ironing out terms ahead of time.

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