Cash is the lifeblood of any business and it is practically impossible to list out all the reasons you might have a cash crunch in your business. You might need money to get the business started, there might a seasonal lull in cash flow, a client might delay in paying up, or you might just be unlucky with a stroke of bad luck. When you need money for your business, your first port of call will usually be the bank. However, in some cases, traditional financial institutions might not be in the best position to provide you with the funding you need. This article provides insight into 5 alternative sources for raising funding your business.
If you are starting a new/innovative business, crowdfunding is probably the trendiest way to raise funding to start or expand your business. Crowdfunding could also work for you if you can demonstrate how your business can meet social needs while remaining profitable and sustainable – think TOMS Shoes. One of the best advantages of crowdfunding is that the money is usually interest-free unless you take the discussions further with angel investors. Of course, you might need to give some of your backers some of the first set of products, memorabilia, or a sort of recognition for their support.
2. Factor Invoices
Factor invoices is another smart way to raise much-needed cash to keep an existing business in operation. If you operate a business in which your invoices for goods or services are not usually paid immediately, invoice factoring can help you to raise cash when you need it instead of waiting endlessly for the invoice to be paid. Invoice factoring is quite simple. You’ll look for a factor, sign your invoice due over a factor, the factor pays you the full amount on the invoice minus the factor fee (usually 10%), you get the cash you need to keep you business running, the factor is left with the burden of getting paid from the client at the end of the day.
3. Personal Loans
Personal loans are in a class of their own because of their duality in that they can make or break your finances. If you have smart financial habits, you could leverage these loans to meet your business financing deals. Personal loans can come in handy for sole proprietorships and home-based businesses seeking small loans for expansion or operating capital. One of the main allure of these loans is that they do not need much requirements and paperwork like traditional loan packages. Personal loans are also processed within a short time, making them ideal for businesses that need cash fast to take advantage of a unique business opportunity. However, you need to ensure that you have made adequate preparations for quick repayment to avoid a loan burden.
4. Business Cash Advances
You can obtain capital to run business operations if you have an existing business with a proven record of past sales and strong prospects for future sales. Some digital payment processors and merchant account companies can offer you cash advances against credit card receipts that your business will get in the future. Many businesses tend to avoid merchant advances because of the widespread notion that such advances often attract high rates. However, you can access refined forms of merchant cash advances under programs such as working capital loans and lines of credit. One of the main perks of the business cash advance is that the application process is fast and you don’t need to provide much paperwork because of the merchant as digital files of your sales receipts.
5. Get money from your pension fund
If you are aged 55 or older, you can raise money to fund your business from your pension or retirement income. If you are under 55, it is not easily to withdraw your pension funds unless you are ill. However, you can still rob your pension in the literal sense of the word to fund your business/startup idea through an early pension release or pension unlocking scheme,
You can use the funds to buy a business or franchise and you can use the fund as startup capital to start something new from the scratch. You need to be sure that the business is worth the risk you want to take with your pension fund because you’ll be asked to pay a hefty tax bill. The downside is that you are borrowing money from the future and you could end up in an uncomfortable retirement if the business doesn’t succeed.