Time is money, and if there is a good idea on the table or you need to move fast to take advantage of a sudden surge in interest in your products, you cannot afford to wait for a bank to approve a loan. Fortunately, in today’s digital age, you always have other options.
Twenty years ago, the only way to raise working capital was to dip into savings or ask the bank for a loan. Both of these methods are still applicable today, but they might not work for you if time is of the essence. The following strategies have pros and cons, so try them at your peril.
Crowdfunding is cool and trendy. Anyone can create a pitch for a crowdfunding site like Kickstarter or Indiegogo. If people think your ideas are solid, they will invest money in the business in return for a product or share of the profits. There are a number of different crowdfunding sites, each targeting a different niche. Read a few site reviews before you tout for investors.
Microloans are for small businesses. You can borrow less than $50k to help your startup or established small business. The loan application procedure is not as onerous as it would be for a traditional business loan. There are different loan schemes for different types of business, so look for the one that best suits your niche.
Waiting for clients to pay is galling if you need money right now. It is not unusual for large sums of money to be tied up in outstanding invoices, which can seriously hamper a small business’s cash flow. Invoice factoring releases money from unpaid invoices, minus a fee. If you need cash quickly, this is a solution worth considering.
Online trading is not for everyone, but if you are familiar with online trading accounts or you regularly use an FX broker to make money trading forex pairs, it makes sense to use your skills to generate extra income for the business. Anyone can open a demo account on a forex trading platform, so test your skills risk-free.
Home Equity Loans
Home equity loans are a handy line of credit for business owners. If you have sufficient equity in your home, open a line of credit so you can boost cash flow in the business. It is a useful way of funding short-term expenses, but you do need to be aware that borrowing against your family home is a risky strategy. If you can’t meet your repayments, the lender will foreclose on your home to recover the debt.
Look for a Strategic Investor
Whereas crowdfunding opens your business to numerous small investors, it is sometimes worth looking for just one or two larger investors who can provide cash in return for a share in the business. Ask a client to help you develop a new prototype or seek out an Angel investor. With the right pitch and accurate financial projections, everyone’s a winner.
If your business needs extra working capital, it is always a good idea to speak to a financial advisor and discuss your options.
Homerun Nievera is the publisher of Negosentro.com and WorldExecutivesDigest.com. He has interests in several tech and digital businesses as director and chief strategist.