Finding the money you need to grow your business can be challenging even during the best of times. It’s an even bigger challenge today as the traditional source of finance has more or less turned their backs to small business. However, one door closing does mean that another will open. In this case, it means that there are several options which a small business owner can turn to in order to get the money they need to grow their business today.
Working Capital Finance
These loans can play an important role in supporting any business, especially small businesses. Working capital finance helps business owners to manage their cash flow by helping to provide a temporary cash-flow bridge which will allow receivables to catch up with payables.
These instruments can be in the form of loans or credit lines. Remember these are short-term loans and are best suited to meet short-term needs. For example, one advantage of working capital loans is that most of the lenders will work with business owners who have little or no credit history. This opens up financing opportunities to help grow your businesses today!
Even if you are not in the market for a working capital loan today, you should start by taking a look at you options now. This way you will know which lender is the right fit for you when you need to use this form of financing. In fact, working capital loans are one of the fastest-growing loans on the market today which means that you have a number of choices for working capital lenders.
Factoring allows a business to sell its receivables to get cash today. It is often used by companies who are looking to speed up their collections or to diversify risks. Factoring can be a big help when customers require a long payment time.
However, factoring can be expensive. Paying a 2% fee on the invoice amount to get paid 30-days earlier equates to an annual percentage rate of 24%. That’s more than most credit cards. This is a reason why factoring has become less popular in recent years. Despite the costs, many lenders have tried to make it easier on small businesses to use factoring. So much so, that approved invoices can be funded in as little as 24 to 48 hours. Some companies have even set up marketplaces where lenders bid on invoices. This helps business owners to get the best possible rates.
Over the long-term, heavy use of credit cards, especially personal credit cards, can damage your credit score. This can make it harder to get loans for yourself and for your business. Whilst this might not be one of the better options, it can be one of the faster ways to get cash for your business.
If your credit limits are pre-approved and you have the available balance then you won’t need to call in advance to approve a much-needed purchase, you can just use your credit card. This can be a big plus when you need cash fast. Remember, this is just a short-term solution. If you find yourself regularly using credit cards for your business, then you probably want to get a business card.
For all the benefits of credit cards, don’t forget the risks. If you use your cards (personal or business) heavily then the available balance will quickly disappear and your credit score will take a big hit.
Even with the restrictions governing the use of funds in your 401(k), this can be a good option. Recent changes in the tax code have allowed individuals to tap into their 401(k) plans for certain purposes, such as setting up a C Corporation.
While the steps are rather straightforward, you probably want a lawyer or a Certified Financial Adviser. By doing so you can ensure that you won’t have to pay any penalties for early withdrawal.
Let’s say you need to get money fast, but you don’t need a lot. A microloan might be a good option. These loans range from $500 to $35,000 and are often a good choice for business owners with bad credit. Whilst commercial banks are not interested in this loans, a number of alternative finance companies have filled the void. Even though the documentation and approval processes are not long as traditional loans the rates tend to be higher. As such, remember the altruism when seeking financings. Short-term loans for short-term needs.
The five options will help you get the cash you need to grow your business fast. The next step would be to reach out to a lender to learn more about their programs and how it will fit with your needs.