If you are looking to improve your cash flow through monetary infusions and want to set up your business for future success, you may want to take advantage of financing opportunities that are available to you. Here are six options you can consider to gain some extra capital.
1. Apply for an SBA Loan
The Small Business Administration (SBA) offers numerous loan programs for small businesses. Specifically, loans for those with less than 500 employees or those who wouldn’t qualify for a traditional loan. The SBA offrs loans through financial institutions rather than disbursing funds directly. If you are interested in applying, find an institution that offers SBA financing and be ready to provide the documentation required for a typical loan. This could include tax returns, your business plan, and financial projections. You may also notice that SBA loans have similar terms, maturities, and interest as regular bank loans.
2. Apply for a Small Business Grant
Many grant programs could be at your fingertips by simply doing a quick search online. You can also find a list of grants that are available at www.grants.gov/. This method of cash infusion is useful as grants can help fund your business activities, development, and research. Unlike loans, grants don’t need to be repaid, however, they may have additional requirements.
3. Look into Online Lenders
Online lenders are generally more expensive, however, loans are often approved within 24 hours. The quick turnaround time is what makes online lenders attractive.
4. Merchant Advances
Merchant advances are popular through services such as Square and Paypal. Although this can be expensive, it is another fast option you can use. As long as you repay the providers quickly, this could be a useful tool. However, I generally don’t recommend this option due to the high cost of financing unless you have no other choice.
5. Credit Cards
Using credit cards to pay bills or take cash advances may sound intimidating due to the high-interest rates and fees you may incur, but if you can pay them off in the same month, this may be a helpful financing option to get cash quickly. However, if you do not have the option to pay it off by the due date or find more affordable long-term financing, this may not be a viable option. And remember that if you take a cash advance, there is a fee which can be significant. Once again, I caution against using credit cards unless you can pay them off to avoid interest on the amounts in use.
6. Factoring
Factoring is a method that allows you to receive immediate cash for unpaid invoices. This can be useful for larger invoices or for customers who are known to pay slowly. You generally receive a large percentage of the balance upfront, and when the customer pays, the remainder, less a fee, is remitted to you.
When times get tough, you may consider options which aren’t ideal. Methods to avoid include delaying payments to vendors and relying on friends and family for funds. Be sure to treat vendors with respect and pay them on time if you want to have a successful relationship. And borrowing from a friend or family member could hurt your relationships.
In the end, there are many ways for you to finance your business. As you are considering the best option to improve your cash flow, avoid securing a loan with your assets such as your house as that puts too much risk on yourself. Ideally, keep personal and business funds separate.
Be sure to reach out to your business banker to see what they can do for you as well. You may find they can provide the necessary funds for a much more reasonable rate than some of the options that I have listed. But if you need funding and a bank loan is not possible, one of the suggestions in this video may be the right fit for you.
