When You’ve Reached a Standstill: Is Getting a Loan the Only Way to Get the Money Flowing in Your Business?

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Keeping money flowing in your business can be very challenging. There will be several financial ups and downs on your path towards growth and success. During these times, when the business is at a standstill, you’ll have to acquire funding to save your business. But which funding sources should you go for? While a traditional bank loan can be the first thing that comes into your mind, there are several other efficient and more comprehensive alternatives that you can go for. These alternatives, unlike most traditional bank loans, are ideal for crucial business capital to keep the business alive during the tough times. Please read on to learn more about the different alternative sources.

1. Invoice Financing

Does your business have accounts receivables that are yet to be collected? Well, how about getting cash for the assets within the shortest time possible other than leaving the sitting on its book? You’ll find quite a number of cash advance companies who are ready to purchase the invoices. These companies are willing to give you up to about 90% of their amount to purchase your invoices. And what’s more interesting with selling your invoices to these companies is that it will save you both money and time for collecting the receivables because the companies will do that for you. And what about the remaining 10%? As soon as the invoices are paid, the companies will deduct their share and refund you the outstanding amount. This method of funding can be very effective for your business right now as the funds will enable you to concentrate more on their business strengths and customers’ credit other than worrying on how to get the money. You can visit www.invoicefinancingaustralia.com.au/ for more information about invoice financing.

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2. Lines of Credit

If you use your business lines of credit well, it can give you access to cash at any given time. It will open up a fluid, flexible quick capital line that you can use in time of need such as now when the business is at a standstill. With this financing option, you won’t have to pay the interest if you haven’t touched the funds yet. This is a good option that you can rely on instead of a personal credit card. But you’ll still have to make the payments on time for you to be safe. Approval of the funds is normally settled within the shortest time possible. Therefore, if you’re looking for a way to bridge the gap in the cash flow, tapping into your lines of credit will be the best option to go for. Most companies, however, demand that you should’ve been in the business for a specific period of time and have met a certain minimum revenue amount for you to be eligible.

3. Inventory Financing

This is an asset-based financing option which you can use to get money flowing in your business. It enables you to obtain a line of credit by using your inventory as a collateral. You can use the line of credit to help your business get through the tough times. You can use the extra amount, if any, for purchasing additional inventory that will help you in future when in need of a financial help. Therefore, if your business is experiencing periods of lagging cash flow or maybe the banks have turned down your application, this option can really come in handy.

4. Peer to Peer (P2P) Financing

This financing option has become one of the most popular options owing to its simplicity and convenience as compared to the rigid and time-consuming process of traditional banks. It connects lenders and borrowers hence omitting the common tiresome bank protocols. P2P lending allows you to apply for the loan through online platforms for an unsecured loan that will be financed by interested peer investor(s). The “lender” is only responsible for providing the platform and facilitating the lending process but is not the actual lender. This financing option also comes with amazing advantages – simple applications, low-interest rates, and quick decisions hence can be the best option for you at this tough time.

5. Angel Investing

An angel investor is a person – can be your supplier, business partner, or another successful business owner – who is interested in investing in your business. This person, in most instances, usually has experience in your industry. For you to win the angel’s trust, you’ll need to clearly demonstrate to them that your business will grow with their investment. This may require you to explain the current and potential value of your business, its financial projections, competitors, and how you’d prefer working with the investor. You’ll also need to have your executive summary and relevant paperwork like the accounts, contracts, and IP ownership with you when approaching the angels. The investor will then fund your business in exchange for a share in the business.

6. Venture Capitalists

Venture capitalists (VCs) are investors who, when they see a potential of a higher rate of return when a young company is sold to a larger company or to the public, are very willing to invest in the company. Therefore, an investor may be interested to invest in your business if it has a large market potential and is in a fast-growing industry. Just like an angel investor, the VC will provide funds for you only if you allow them to have a share in your business. However, VCs prefer investing on a much larger scale, perhaps millions of dollars. These investors will earn a part of your annual revenue but they’ll have to wait until you sell your company for them to make the real profit. This, therefore, explains why they’re more willing to invest in a company that has a potential of demonstrating a rapid and consistent growth and not just in an untested idea.

7. Funds from Friends and Family

Your friends and family understand you better than anyone and are more concerned to see you succeed with your business. Borrowing from friends and family comes with a lot of advantages that could hardly be realized with bank loans. You’ll be given the funds with no strings attached and will pay back with no interest charged. However, there have been cases where people borrow from friends and family and fail or delay paying it back as they’d agreed. This fear of uncertainty has made many people very reluctant to lend money to their friends and family, especially if they haven’t been trustworthy in the past. Therefore, ensure to have good relationships with your friends and family so they could have your back during tough times like this.

8. Merchant Advances

This is a very nice and popular financing option that you can use to keep your business up and running especially if you’re using credit cards. When you get a merchant cash advance, the lender will rely on the future credit card income to have their finance back. This will also be a good option if you’re in a bad credit situation since the lender focuses mainly on your credit card statements instead of credit history. The company will not ask you to make regular fixed payments but will just be collecting a certain percentage of the credit card sales you make every day. These advances do not come with a fixed rate of interest but can be very expensive despite its ability to saving your business at standstill.

 9. Trade Credit

Working with your suppliers can be an awesome idea during this time also. You should consider negotiating for better terms such as a longer time for payment or more discounts. This will allow you more time to plan on how you’re going to pay the suppliers and also enable you to cut down on your overall costs. However, it might be a bit difficult to convince the suppliers especially if you’ve been doing business with them for a very short time now or if they’re worried you might cut back your orders or go out of business. Therefore, ensure to always establish a good relationship with your suppliers to be in a better position to come to an agreement when hit by a crisis like this.

10. Purchase Orders

If you’ve placed an order with your suppliers and agreed to make payments for the goods or services over a certain period of time, you can approach the cash advance companies to finance these agreements. This option will enable your business to benefit from the trade discounts since you’ll now have instant cash enough to satisfy the suppliers.

11. Crowdfunding

The business investment market has been largely impacted by the mass digital connectivity. Online crowdfunding financing option will enable you to trade your equity for finance to get money flowing in your business. You’ll need to show a potential for a return on investment in order to attract more investors to your business hence getting back the business to its feet and growing.

Conclusion

Traditional bank loans can be very stressful and difficult to obtain, which can be a disappointment to your struggling business. But luckily, you can use any of these alternative sources to acquire funds and get your business up and running after reaching a standstill. Therefore, choose the best option that fits you and go for it as soon as possible. You may need to install one of the best workflow management software to improve the performance of your business and to prevent seasonal standstills in future as much as possible. Also, look out for other relevant blogs to learn more about the financing options to implement in your business to keep the money constantly flowing. Good luck!