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6 Proven Methods to Access Cash for Growth (Number 3 Is Our Favorite)

Many people think small business owners are risk takers but actually, the opposite may be true. You do everything you can to make sure you’re on solid ground financially. Let’s say you land a big deal or win a new contract. Of course, you may need to hire a new employee, purchase equipment or simply cover payroll.

Whatever the case may be, where do you find the working capital to make it happen? Do you have money set aside for a rainy day? Sometimes, just knowing that you have options can be your secret to success. That’s the reason we’ve pulled together this rundown with 6 choices you might need to consider:

1. Small Business Loans

Good when:
You have bankable assets or personal collateral, such as home equity or capital equipment, or you have been in business for 3 or more years.

The gist of it:
Depending on the type of business you own you might have assets or resources that can be used as a guarantee to secure a bank loan. This debt capital can be used to boost cash flow or invest in additional equipment or personnel. In the event that you operate a service-based business it is unlikely you have collateral to secure a loan. In this case, you may use personal assets such as your house, but these secured loans come with obvious risks that should be avoided when possible. With a solid average daily balance and an established business of three or more years, you’ll likely qualify for a business line of credit. Remember, interest rates on a business line of credit (LOC) can be 8 to 14 percent or more, which over the long-term is not going to improve your cash flow. Visit your business banking representative for more details.

Usually, small businesses must be in business for a certain period of time and generate a minimum amount of revenue per month in order to qualify. The approval process is quick, typically taking only a few hours and providing funding within days. If your small business has a dependable monthly revenue stream, this finance option may be ideal for you.

2. SBA7(a) Loans

Good when:
You’re operating at a profit, doing business in the US, have reasonable invested equity, have exhausted other alternative financing sources including personal assets, demonstrated a need for the loan, and you are not currently delinquent in any debt to the US Government.

The gist of it:
Depending on the type of business you own you might have assets or resources that can be used as a guarantee to secure a bank loan. This debt capital can be used to boost cash flow or invest in additional equipment or personnel. In the event that you operate a service-based business it is unlikely you have collateral to secure a loan. In this case, you may use personal assets such as your house, but these secured loans come with obvious risks that should be avoided when possible. With a solid average daily balance and an established business of three or more years, you’ll likely qualify for a business line of credit. Remember, interest rates on a business line of credit (LOC) can be 8 to 14 percent or more, which over the long-term is not going to improve your cash flow. Visit your business banking representative for more details.

Usually, small businesses must be in business for a certain period of time and generate a minimum amount of revenue per month in order to qualify. The approval process is quick, typically taking only a few hours and providing funding within days. If your small business has a dependable monthly revenue stream, this finance option may be ideal for you.

3. Working Capital Advance

Good when:
You want to put money back into your business for growth and at the same time, have some “working capital” to spare for everyday operational costs such as payroll or inventory. You may have less than amazing credit and you’re not interested in risking personal collateral.

The gist of it:
Most commonly, small business owners will utilize a working capital advance when they don’t have weeks or months to wait for a traditional bank loan process. Banks still want to see credit scores above 700, so many will have a difficult time getting approval. The beauty of the working capital advance is that even with bruised credit, most small business owners qualify because the funding is based on the average daily balance of the business account. The application is short, no personal collateral required and the funds are provided within days.

4. Family and Friends

Good when:
You have a robust connection of business contacts and/or a close-knit family that is supportive and that has the available means to lend you the funds.

The gist of it:
Many small business owners ask family and friends for loans to help fuel their business growth. This popular method of raising working capital requires some effort and depending on the type of person you are, and the friends you have this can be an easy proposition or an uncomfortable predicament. It can strain strong relationships and hurt friendships, but of course it can make them money as well. Prepare a well-written plan that details how the funds will grow your business, and most importantly, how and when this growth will pay them back their loan plus any interest or proceeds negotiated with the loan.

5. Small Business Innovation Research Grants (SBIR)

Good when:
Your business provides public services and works to stimulate the economy. Visit GRANTS.Gov for a list of eligible businesses.

The gist of it:
If you have the time to complete a demanding application process, depending on the type of business you own this can be a great way to go. It’s not for everyone, the timing isn’t always in your favor, and it can be tedious, but check out GRANTS.Gov to see what might be available.

6. Invoice Factoring

Good when:
You’re in start-up mode, smaller companies who sell products or services to larger companies, businesses that are waiting 30+ days for their customers to pay.

The gist of it:
Factoring, also known as accounts receivable financing (or A/R factoring) is a method of accessing cash that many people don’t know about yet, is widely offered especially in certain industries such as transportation and staffing. The scenario we opened our blog with is one that we hear quite a bit from our customers. ‘It’s not the revenue that slows growth, but the speed in which customers pay that hurt our cash flow.’ With invoice factoring there’s an easy solution! You simply sell your accounts receivables or invoices (those you want) to a third-party company called a factor at a small discount. The factor takes over the accounts receivables task of collecting the invoice based on the invoice terms (30, 60, 90 days). You get your money fast and can use it to fund business growth. The interest rates are tiny compared to almost any loan and since it’s your money there’s no personal collateral needed to gain access to it.

Whether or not you believe in the old adage, “it takes money to make money,” most small business owners need an influx of working capital at some point in the life of their business. When you spot an opportunity on the horizon or one falls in your lap, it’s great to know that there are options available to secure the funds you need.

We understand that you face cash flow demands on a daily basis. That’s why we make it easy for you to find a financial solution that works for you. Give us a call at 888.450.2580 or fill out the form to find out which funding program fits your needs. We have several options and we’d be happy to go through them with you. Why not get a free, no obligation quote today?