As a small business owner, you likely understand how challenging it can be to get a loan. However, while it is difficult to get a lender to take a chance on you, it is not impossible to find business capital. Let’s take a look at some of the options that could be available to help small businesses finance their operations.
1. Ask Friends or Family for Money
If you are just starting out as a business owner, your friends and family members are likely going to be your biggest supporters. They are most likely to be the people who will finance your dream before the company has a tangible product or any customers. The best part about seeking funds from a parent or close friend is that they may be more flexible when it comes to repaying a loan. In some cases, they may not even expect to see the money back at all.
2. Sell Accounts Receivable
If your business has accounts receivable, those could be sold for cash to a factoring company. Typically, the factoring company will take a portion of the amount owed as a service fee. When the bill comes due, vendors will pay the entity that purchased the accounts instead of paying you directly. It is worth noting that there may be fewer protections for companies that choose to factor instead of taking out a loan.
3. Work With a Hard Money Lender
Hard money lenders generally provide loans to small businesses that are meant to be repaid in a short amount of time. These lenders may also refer to their products as bridge loans because they are meant to tide a business over until its cash flow problems subside. A hard money or bridge loan may be ideal when your company needs money to fulfill an order or is waiting for customers to pay their balances owed.
4. Ask Your Customers to Pay Ahead of Time
Asking your customers to preorder a product is essentially like asking for a loan or advance. However, you won’t have to pay interest to your customers. Furthermore, you may be able to take early orders with the caveat that the product may not be ready for months or years from now. That gives you plenty of time to make sure that it is perfect before going to market.
Small businesses may find it difficult to maintain steady cash flow over their first year or two of existence. However, by getting creative, it can be possible to find ways to cover shortfalls and ensure that customers receive quality goods and services. You may want to visit Thinking Capital for more of their resources.