Owning a small business means that you wear many hats. On any given day, at any given time, you may have to be manager, employee, mediator, ruffled feather smoother, diplomat, entrepreneur, and Chief Financial Officer. It can be a struggle to juggle so many responsibilities, especially when your business is walking a fine line between being in the black or being in the red.
If your current financial situation is keeping you from being able to successfully operate your business and focus on the other responsibilities that you have, you may just need a helpful influx of cash to get you through a stressful time. This is perfectly normal and a common way that many successful companies have gotten through a rough patch.
In fact, there are a lot of avenues open to small business owners. Here are 9 ways you can get the funds you need to let you focus on growing your company rather than worrying about the bottom line falling apart.
9 Ways to Get The Money You Need When You Need It
- Close circle investors. Especially for businesses that are just starting out, a common practice is to turn to close friends and family as investors. Instead of just a donation or a loan, the business owner can actually sell the investor equity, which means they have a share in the business.
There are pros and cons to this method of investing. It can be easy to get someone who has a vested interest in your success to loan you the money, but it is risky. If your business is not successful, your relationship, no matter how close you are, can be affected.
- SBA (Small Business Association) loans. Designed for businesses who have already gone through their first stage successfully but may need funding later, these loans can be for up to $5,000,000. Most of the loans are around $350,000.
In this type of loan, the SBA gives a guarantee to a bank or financial institution that their money is secure, and they provide you funding.
- Asset based lending. If you are a small business owner that owns larger companies, asset based lending may allow you to finance your corporate assets. This can include invoices owed to you, inventory, and other assets.
Similar to a line of credit, this type of lending is usually used to finance a company’s inventory or accounts receivable, but it usually requires having at least $1,000,000 in monthly revenue on the table.
- Credit cards. Credit cards are the most commonly used way to get your business through a small pinch. Depending on your credit, you may even be able to use them for larger problems. However, you have to be very careful when you enter this avenue of financing.
Credit card companies are often very lenient in increasing your credit limit if you are making the monthly payments, but these payments can get out of control quickly before you know it. A general rule of thumb is to only use credit cards for immediate costs that you can pay off quickly.
- Equity auctions. If your business needs any kind of property but you just can’t afford it right that minute, you may consider equity auctions. Once you scour the listings for the property you want to bid on, you can look into auction finance or property development finance to make your purchase.
Before the property goes up for auction, you should approach the lender with your needs, including how much it costs, the timeframe and the true market value. When you are ready to submit your application, see Equify Auctions today to see if this type of financing will work for you.
- ACH loans. In an ACH (Automated Clearing House) loan, a potential lender will actually finance your future sales by reviewing your finances, including your financial statements and bank deposits. Then they will come up with a figure that represents the maximum amount they will lend you.
In this type of loan, the lender is taking a risk that you will make the projected sales, and you are agreeing to daily, weekly, or monthly automatic withdrawals from your account until the loan is repaid. These loans can be very expensive, so be careful if you decide to go this route.
- Invoice factoring. If your company has steady commercial business but your customers generally live on the 30, 60, 90 day invoice structure, you may have a solid annual income but rough cash flow while you wait. Invoice factoring takes this into consideration.
In this type of loan, a lender will review your outstanding invoices and give you an advance on any that qualify so that you can continue to operate your business. These loans can be ongoing and used frequently.
- SBA microloans. Similar to the SBA programs above, a microloan will give up to $50,000 to small business owners who need help growing their business. These loans come complete with financial and business consulting.
- Peer-to-peer lending. A mix between business financing and personal lending, this type of loan occurs when the owner of a small business obtains a personal loan from an individual or individuals who provide the funds.
Potential lenders can determine whether or not to fund your loan based on multiple factors, such as your personal credit, business, and intention of use.
- Home equity line of credit. Often when you own a small business, your personal and business lines have to blur financially. When things take a downward turn in your business, you may need cash fast to continue to fund it. To do so, many owners take out a home equity line of credit.
While these are common, they are also potentially dangerous because now your home ownership is contingent on the success of your business. If things don’t turn around, you may lose your business and your home. However, these loans have pros to them because they are relatively cheap and easy to get.
Financial Difficulty Doesn’t Have to Be Permanent
If your business is struggling, you have many options available to help you turn it around. It is always a smart idea to get tips from a financial advisor before you find yourself in an expensive loan, but there are avenues you can take to get yourself out of the stress of operating in the red so you can focus on growing your successful business.