It’s typical for businesses of any size to fall short in the financial department at some point. But while some financial problems can wait, others need to be addressed right away. Else, it can seriously harm the business’s future.
The problem is, securing quick cash can be challenging and frustrating. Banks typically have a lengthy process for their loan applications. Pitching investors can also take a lot of time, which you may not have.
If you find your business in this situation, it would be best to have a lineup of options at your disposal. To prepare you for this matter, here are the things you can do when your business needs quick cash.
Secure Financing Online
There are a growing number of online lenders like Personal Money Store that you can access for quick financing. They are a great option in terms of convenience and efficiency. All you need to do is submit your application through their platform. Many of them claim to give loan decisions within minutes or hours, so you can get the fund you need instantly.
Besides that, online lenders are also known to be more lenient when it comes to their qualifications. Even if your business doesn’t have stellar credit, you’re still likely to get approved. However, they might only be able to provide a modest amount of funds. You may have to consider other options if you need a sizable loan.
Use Line of Credit
A line of credit is a flexible financing source if your business needs quick cash. It simply works the same with a credit card where you can borrow funds anytime you need as long as you don’t exceed the approved credit limit. Since it’s also revolving, your credit limit goes back up whenever you make a payment for the amount you borrow.
Note that you don’t have to use your total credit limit. You can just take how much you need and pay only the portion of the money that you borrow along with the interest. But most lenders may allow you to repay the full balance early to save on interest costs.
It’s also worth pointing out that the borrowing limits of a line of credit are smaller than a term loan. Typically, it may range from $1,000 to %250,000. If you need a larger amount, this may not be the most suitable option.
Utilize Accounts Receivables
If your business has large outstanding receivables, it might be a good idea to utilize them and free up some money for immediate financial need. You can do it by selling these account receivables to factoring firms. The factor will then write your business check minus the fees, which usually range from 2% to 5%.
Although factors don’t consider your business credit history, they give much importance to the customers’ ability to pay when assessing risk. Thus, this can be a viable source of quick cash only if your business has a lot of orders coming in.
The Small Business Administration has a microloan program for business owners. They have 150 approved microlenders you can reach out to, whether you’re looking to increase working capital, buy inventory, or cover payroll costs. However, these microloans can only provide up to $50,000, and their interest rates are generally between 8% and 13%.
Additional Options To Consider
Taking out a loan or getting financing might seem the most suitable solution if your business needs quick cash. But there are additional sources you can look into that might somehow help you raise the necessary funds.
If your business is in desperate need, it wouldn’t hurt to include the following routes in your options.
- Cut Back On Expenses: Your business probably has expenses you can cut back for the time being, such as repainting your building or buying new equipment. During a cash shortage, prioritizing your company’s expenses is necessary. As much as possible, focus on the costs that keep your business operational and generate revenue.
- Sell Non-Essential Asset: Besides cutting discretionary expenses, you also have the option to get rid of non-essential assets in your business. These can be idle equipment, commodities, or properties that are no longer used or don’t generate revenue for your business.
- Ask Help From Personal Network: If pursuing a lender is not something you think your business is ready for, you can ask help from your personal network, such as family and friends. Though this might seem an uncomfortable option, it’s a solid alternative. Just make sure to write up a contract that signifies repayment terms to avoid conflict. Doing so can reassure them that you hold yourself accountable.
Prepare Your Business For Better Cash Flow
Financing is a helpful tool to get quick cash for your business immediate needs. But if financial shortages keep recurring in your business, loans are only a temporary fix. You need to be proactive when it comes to your business’s finances. It would be best if you try to tighten up your business operations, use management accounting, or monitor key performance indicators like sales and profits.