Whether it’s from a seasonal slow-down, a particular customer taking their time with a payment, or just a stroke of plain bad luck, there are times where many small business owners find themselves squeezed for capital, and unable to maintain their hold on their company’s finances. If you’ve found yourself in this situation, and you’re beginning to feel the pressure, here are a few ways for small business owners to raise cash fast…
Business Cash Advances
Image: Hloom via Flickr.com / CC BY-SA, 401(K) 2013
There are a lot of merchant account companies out there who will offer advances against future credit card receipts. You may have heard of these referred to as “merchant cash advances”, and caught wind of their reputation as being expensive and uneconomical methods for raising capital. However, modern programs offer much more generous terms, and you can even find hybrid programs with names like a “line of credit” or a “working capital loan”. These work through your business being advanced the money, and you paying it back with an agreed portion of your future sales. Of course, you have to pay a fee for the advance. However, the application process is often expedited and will typically involve very little paperwork.
The option of factoring certainly isn’t for every business, but if you’ve got a lot of outstanding invoices, or receivables where the customer has been paying slowly, you can easily speed up the collection cycle. You start with finding a factor to assign your invoice to. Then, you receive the full amount of the invoice, minus a fee. These fees can be pretty big depending on the company you use, but if you have payments you need to make in a couple of weeks, this can be a smart way around the issue.
Many business owners shy away from equity loans and avoid them like the plague, but it can be reassuring to know that you wouldn’t be the first entrepreneur to tap into home or auto title loans and come out on top. In fact, if you have some kind of equity, and your business is otherwise pretty solid, it’s often one of the quickest and easiest sources of capital available to a business. Many successful businesses have been funded by equity at one point or another, but it can be risky, as there’ll be at least some chance that you’ll lose the roof over your head!
Some vendors will be willing to extend their repayment terms if you’ve been a good customer for a number of years. Many even have their own financing programs and terms, like “pay on scan” programs, where you’ll only pay for products when those products are scanned and sold to your end customer. Carrying costs can be reduced or even rubbed out entirely, and you may be able to leverage other efficiencies that can lead to great cost reduction and higher sales in the future. If you’ve had a good relationship with your supplier for a while, reach out to them and see if they’ll be willing to extend your credit.