When starting a business, it’s not uncommon for entrepreneurs to find themselves short on funds. New businesses that face funding shortfalls often find that money is one of their biggest hurdles, and many small business owners never get potentially successful businesses up and running because of their lack of cash.
If you find yourself in a tough spot financially, you can go to a bank for funding, but many people have a hard time getting money from a bank; especially when they don’t have a stellar credit record. Business owners are risk takers, and oftentimes, their old ventures can leave a mark on their credit record. When this happens, it makes it almost impossible to borrow money from a bank.
Banks aren’t the only answer, and many smart entrepreneurs find that alternate sources of funding fit in better with their business plans. If you’re having trouble with financing your business, check out some of these alternative sources for funds:
Factoring
Factoring gives you the opportunity to finance your business based on your invoices; you sell your receivables to a third-party company, and they give you cash for them. Typically, you can expect to get around 80 percent of your invoice’s value.
Factoring gives you immediate access to cash without having to deal with a bank. If you have receivables that you have yet to collect, factoring is an easy way to increase cash flow.
Merchant Cash Advances
A merchant cash advance is like a payday loan, but it’s geared towards business owners. Industry expert Ian MacKechnie says that these types of loans are based off of a business’s credit card transaction volume; the lenders look at your credit card statements, then they lend you up to 125 percent of your average monthly transactions.
Repayment terms on these loans vary from lender to lender, so if you search for a good lender, you can find repayment terms that are very flexible. These advances are a quick and easy way to get cash, and you usually have the money in your account within a few days. The process is easier than getting a bank loan, and you don’t have to go through a heavily regulated application process.
Automated Clearinghouse Loans
ACH loans are similar to merchant cash advances, but they are based off of the funds that you presently have in your bank account; they don’t base these loans off of your credit card revenues. These types of loans aren’t great for cash-strapped business owners, but they are perfect for businesses that need cash in a hurry. Usually, these types of loans are approved within 24 hours, and the lenders don’t look at your credit history, so it’s an easy way to get a quick cash infusion.
Business Credit Cards
Business credit cards don’t need much of an explanation, but many owners forget about them when they need cash quickly. They are just like personal credit cards, but your business can use them to buy supplies, equipment and inventory. Typically, you have 30 days to pay your cards; if you don’t pay them in this time, you start accruing interest on your balance.
Credit cards are easy to use, and most business owners don’t have a problem opening a new account. When you get a business credit card, it’s an easy way to start building credibility with traditional lending institutions, so you’ll be more likely to get money from a bank or credit union in the future.
Opening a new business isn’t easy, but if you can figure out how to finance it, you are well on your way to success. If you think outside of the box, you don’t need to rely on traditional institutions for funding; use alternative methods to get the cash that you need.
