By Karlene Sinclair-Robinson
Today’s savvy business owners know they must stay ahead of the financing game. Every day these entrepreneurs are working to grow their businesses, expand into new markets, increase revenue, hire new employees, pay their taxes and be even more productive. The opportunity to do all this is often delayed or derailed due to insufficient cash flow and their inability to access traditional financing solutions. The constant struggle to keep the doors open is enough to cause many small business owners to pack it in – closing down for good. Seeing their dreams die due to lack of capital is painful and can continue to aid the lagging economy.
Capital acquisition methods have evolved over time. With the advent of new online technology that can now facilitate multiple business financing opportunities, more small business owners can now obtain much-needed cash infusion. Other offline financing opportunities still abound and continue to grow.
The financing options that are available are uniquely offered based on a number of factors. These factors can include but not limited to: client type, creditworthy clients, business industry, how your company gets paid and so forth. Paying your taxes, including payroll taxes is also very important part of the equation.
Here are a number of financing solutions to consider:
- Microloans – This type of loan option usually goes up to $50,000. Borrowers can access microloans through local area financing sources that also provide business training and counseling support. There are other such sources that operate nationwide. These lender sources will not focus solely on your credit, cash flow, and collateral mix like banks must do. They might have a loan committee for such approvals. This option should be a part of a small business owner’s plan for capital expansion.
- Non-Bank Small Business Loans – Business owners can access this loan type through lender sources or online platforms that are non-bank affiliated channels. These lenders are not FDIC.gov governed, and so, are not as regulated as the banks are. Some of these sources will fund up to $600,000 depending on your business and your ability to qualify for said loan. The maximum amount can be higher.
- Revenue-Based Financing – As businesses generate revenue, their Profit & Loss Statement might be coming up short – sustaining a loss. Try getting a bank loan with that kind of record. Revenue-Based financing is now filling that gap. These companies are financing businesses based on their monthly / annual revenue. They are providing short-term financing based on the business revenue history. This solution is making a difference for many companies who might not be able to show a profit, but need that short-term capital infusion to increase their revenue.
- Factoring – Don’t discount the concept of Factoring. The ability to sell accounts receivable and gain access to cash today is vital to any small business. You can jeopardize your business when you have outstanding receivables. When there is no money in your bank account to meet payroll or cover those unexpected expenses, waiting 30 days can cause you to have to close your business. Selling the outstanding receivables is an option to consider when you need an immediate cash infusion. Don’t wait until last-minute to gain access to this option.
- Crowdfunding – The opportunity to finance your idea or product through this type of source has this option being a hot solution. It is an online financing model that has grown tremendously over the past five (5) years. The key is to understand which Crowdfunding platform best suits your product or service-related business. The most important thing to note is that it is illegal in the United States to raise large capital investment if you are not an accredited investor. When using this option, you must give something in return for any money received via these sites. Look out for the final rules from SEC.gov if you are considering this option and be sure to read their guidelines on raising capital.
The above-mentioned financing methods should be considered based on where you are in your business and your plans for the future. Be sure to create a strategic plan to financing your business.