Business owners often look for outside financing to strengthen cash flow and spur growth. However, in challenging economic times it can be especially difficult to secure funding. Here are some strategies that can boost your efforts to obtain business financing.
Apply for Loans
Standards are strict for obtaining loans from traditional banks, but since some funds are usually earmarked for small business lending, it is worthwhile to apply. Alternatively, if your company qualifies for a loan from the U.S. Small Business Administration, you’ll receive better terms. Businesses that need smaller amounts of money can apply to microlenders, which typically ask for less documentation and offer more flexible terms.
Invoice factoring involves selling your unpaid accounts receivables to a factoring company in exchange for immediate cash. This is an expensive method of business financing, but it has the advantage of easier access. Even if your company is new or has poor credit, you can usually qualify for this type of funding.
Use a Credit Card
A business credit card can function as a line of credit when you periodically need to strengthen your cash flow. However, it is imperative that you should keep up with your monthly payments so that your credit score doesn’t take a hit.
Many entrepreneurs finance their startups by obtaining loans from family, friends, and acquaintances. Be sure to create your business plan first, though, and be honest with your investors about the risks involved. Crowdfunding is an excellent way to raise a relatively small amount of money from people you know as well as strangers. If you need a larger amount of business financing, consider approaching an angel investor. This strategy, though, requires a unique idea, a detailed plan, an assessment of your competition, and preferably an experienced advisor.
Use Retirement Funds
The tax code has provisions that allow you penalty-free access to the funds in your 401(k) under certain circumstances. Keep in mind that by using this method of funding you are putting your future on the line, so only take this approach if you have great confidence that your business venture will succeed.
For more advice on financing your business, contact Evolt Capital.