Options for Business Owners That Need Capital Fast

There are a lot of issues that you need to deal with if you are trying to run a successful business. We have talked at length about the importance of coming up with sound marketing strategies, hiring the right employees and having a great product.

However, cash flow management is among the most important things that you need to focus on. One study from US Bank shows that 82% of business failures are attributed to poor cash flow management.

For so many startups and small businesses, the role of cash flow is so vital and whether it is unexpected costs or not hitting revenue targets, a lot of business owners often find themselves needing immediate funds to pay for bills and staff.

There are a number of options available for businesses that need money quickly, whether it is through loans from private banks and lenders or using collateral or future orders in order to access finance. We have also talked about hard money loans in this article, which can be a good option for some business owners as well. We give an overview below.

Short-Term Loans

One option is to take out a short-term loan from a bank or online lender. These loans are usually easier to get approved for and can provide fast access to cash, especially if you need it within 48 hours. 

The interest rates can be high, especially if you are veering towards the payday loans route, but if you can stay within the realm of personal or instalment loans that are unsecured and repaid over 12 months, you can pay less than 10% interest and it is cheaper if you pay back the loan early. (Source: Proper Finance)

Unsecured loans typically go up to a maximum of £25,000 or £50,000, but once you start using business assets such as property, equipment or vehicles, the amount can start to increase in the hundreds of thousands.

Invoice Financing

If a business has outstanding invoices from customers, they can use invoice financing to get cash quickly. With invoice financing and discounting, a lender advances a portion of the invoice amount, usually around 80-90%, and then collects the full amount from the customer when the invoice is due. This can help improve cash flow while waiting for customers to pay.

Similar to invoice financing, factoring involves selling accounts receivable to a third-party (called a factor) at a discount. The factor advances a percentage of the invoice amount upfront and then collects the full amount from the customer. Factoring can be a quick way to get cash, but businesses may receive less than the full value of their invoices.

Merchant Cash Advances

Another option is a merchant cash advance, where a lender advances cash against future credit card sales. The lender takes a percentage of daily credit card sales until the advance, plus fees, is repaid. While merchant cash advances can provide fast cash, they often come with high fees and should be used cautiously.

Line of Credit

A business line of credit is a flexible borrowing option where a lender approves a certain amount of credit that the business can draw from as needed. Interest is only charged on the amount borrowed, making it a cost-effective option for managing short-term cash flow needs. These were popular options for businesses that needed quick financing during the pandemic.

Crowdfunding

In recent years, crowdfunding platforms like Kickstarter and Indiegogo have become popular ways for businesses to raise funds quickly or ways to get startup funding. Businesses can launch campaigns to raise money from a large number of people, often in exchange for rewards or equity in the company.

Personal Savings or Assets

In some cases, business owners may choose to use their personal savings or assets to inject cash into their business quickly. This could include personal savings accounts, retirement accounts, or even assets like real estate or vehicles.

There are a number of famous entrepreneurs that used their own personal homes as collateral for the sake of their businesses – but this can lead to some murky situations at home if you cannot repay the debt and your home is at risk of repossession. 

Credit Cards

While not always the best option due to high interest rates, business owners can use credit cards to access quick cash when needed. However, it’s important to use credit cards responsibly and pay off balances quickly to avoid accumulating debt.

One should avoid using overdrafts because this is one of the most expensive ways of borrowing in the market and can add extra debt to a business which is already struggling with cash flow issues.

Government Grants or Loans

Some governments offer grants or low-interest loans to small businesses in need of funding. These programs can provide a source of quick cash without the high interest rates associated with other forms of financing. It certainly helps if you are running a business that benefits the environment, is involved with R&D or has a social or humanitarian cause. Otherwise, government grants are notoriously slow for getting approved and funded.

When considering these options, it is important for business owners to carefully evaluate their needs, compare terms and interest rates, and choose the option that best fits their financial situation and goals.