There is no truer business adage than “it takes money to make money,” and sometimes, it takes even more money than you expect to maintain a growing business. There are many reasons you might find yourself short on cash while your venture thrives ― late-paying clients, seasonal slumps, or mismanagement of funds are most common ― but the continuation of your business’s success depends on finding more money to feed your business fast.
Traditional ways of securing money for businesses, like seeking investors or applying for grants, usually takes too much time when a business is hot. Instead, you should consider the following six alternatives for securing additional funds to keep your business growing.
There is a reason crowdfunding is such an attractive financing option for businesses: With almost no effort, entrepreneurs can raise small fortunes from small-time, individual investors. Crowdfunding is also a cheap way to workshop new business ideas; before you invest time, energy, and money into a new product, you can place it on a crowdfunding site like Kickstarter or Indiegogo to see how much interest it generates.
Unfortunately, there is no guarantee your crowdfunding effort will work, and no one can say for certain how fast you can raise the money you need. Additionally, successful crowdfunding requires excellent marketing , which may siphon resources from everyday business. Though crowdfunding is incredibly trendy, you should only resort to crowdfunding if you have minimal constraints on the project you need funded.
Business Cash Advances
Also called merchant cash advances, this method of procuring money once had a bad reputation. Essentially, you work with your merchant account company to take an advance on your future credit and debit sales. Afterwards, you pay back the advance through a percentage of your credit and debit transactions.
In the past, the terms for this advance were insufferable: outrageously high interest, impossible deadlines, and necessary renewals. Fortunately, most business cash advance providers have updated the process to make these programs more manageable for small businesses. Today, it takes minimal paperwork to apply for a cash advance, so you can get your hands on cash in a matter of hours.
Like business cash advances, invoice factoring is a method of more quickly procuring the money you already have. If your business relies on invoicing, a lazy client or late payer could prevent you from having your hands on the money your business needs to survive. Rather than waiting months for clients to pay your invoices, you can receive your dues straightaway through a company that provides invoice funding. For nominal fee, you can sell your outstanding invoices to someone else and receive proper payment in a timely manner.
Applying for traditional loans from traditional lenders is a headache, and it can take weeks to get the cash in hand. Conversely, microloans ― which include any loan less than $50,000 ― are relatively fast and painless, and if you are looking for a minor expansion, they might provide all you need to succeed. Not all lenders provide microloans; usually, small lenders specialize in particular types of businesses, like “daycare” or “food and beverage.” However, it is important to remember that this money is still a loan, which means you will have to pay it back eventually.
Everyone knows a 401(k) is untouchable until retirement, right? Actually, through a Rollover as Business Start-ups (ROBS) program, you can take money from your retirement fund to fulfil your entrepreneurial dreams. The program is perfectly legal and does not incur penalties like other early withdrawals would. The only downside is the complex set of rules that usually accompany these programs. If you forget even one stipulation, you could owe the IRS a fortune in back taxes and fees, which endanger both your business and your retirement .
Sales and Discounts
You are in the business of making money, and sometimes, doing regular business is the best way to get money fast. Sales and discounts are powerful tools to get customers spending. Retail stores know this marketing trick all too well, but professional services companies can also profit by offering markdowns on more advantageous payment options, like annual payments or early renewal. For example, instead of waiting every month for a certain payment, you can offer clients a 5 percent discount for paying upfront every year. Most will jump at the chance for any savings, giving you some quick cash.