Operating a small business takes a lot of work and a strong handle on multitasking with areas of finance, customer service, marketing, and human resources. When any of these areas slip, it can create havoc on the rest of your business operations, but none are as devastating as facing a financial crisis. If your company’s bank account is showing a serious problem, you could benefit from a quick cash influx to keep things operating while you get back on track. Here are some of the best ways to boost your bank account when your finances are in jeopardy.
Microloans and Small Business Lenders
If your company doesn’t need much money, you may be able to avoid the long application and approval process of a traditional small business loan and work with a microloan or online business lender. These options are beneficial because they are fast business lending opportunities, helping save your bottom line when you are under a time-crunch. The loan criteria are not as difficult as a commercial bank, typically requiring less documentation and collateral to secure the loan. The loan amounts often vary between $500 on upwards to about $35,000, and despite the flexibility in the underwriting, the interest rates are often a bit higher than a traditional small business loan because of the extra risk. If you haven’t been able to establish a long credit history for your business, this a great option for securing the capital you need.
Another method for improving your cash flow is invoice factoring. Companies that don’t have a lot of credit or poor credit rely on this method, as well as companies that are often required to fill large orders before they see payment for the order. In this case, the company takes its outstanding receivables (customer invoices) and sell them to a factoring company. The transaction isn’t for the full amount of the invoice, but the company is able to access the cash rather quickly. The factoring company then pursues the client for the invoice payment, and keep the payment. Any leftover amounts are returned to the original seller, minus a fee for the services. While this is a quick way to turn outstanding invoices into quick cash, long-term factoring can be costly for the company. The fees for accessing funds can be steep and at times may be equivalent to high-interest rates over 20%. There is a lot of pressure to make receivable factoring more competitive, as many small businesses are having to turn to these alternative financing options.
Business Credit Card
If you are willing to spend the money on the interest equivalent with invoice factoring, a business credit card may be another financing option to help you meet certain financial obligations. A small business is able to secure a commercial credit card if the business owner has a good credit rating and a reliable source of income. This is also one way to establish your business credit history, as you will be able to use your personal credit to start a line under your business tax ID number and name. Interest rates will vary for on a business card, and the key to keeping yourself from drowning further in debt is paying off any amount charged each month by the due date. There are some credit cards that offer cashback purchases for business needs, such as with utilities or cell phone providers. This can be a way to make the card work in your best interest.
Commercial Bank Loan
Even though this one of the more difficult financing options to secure, a traditional business loan will give you the best rate for some extra cash in your account. There is a lot of paperwork that goes into a business loan, and your company will need to be able to provide substantial collateral and a strong credit rating to get approved. Some banks require a business plan that will show you intend to do with the funds and how the investment will make the money needed to pay the loan off. The terms are also more in keeping with a personal loan but can be spread out over different yearly plans. For some businesses, the Small Business Administration (SBA) is a way to reach out for a commercial loan. The SBA has a program that works with traditional bankers to offer low-interest rates loans for entrepreneurs and small business owners, provided they pass the application criteria found on the SBA website.
Making sure your business has the funds to continue operations is a critical part of your responsibilities as the owner. Your employees need to be paid, you need to purchase inventory, and you need to pay your insurance premium. There are many financial needs that can’t afford to wait in your business, so pursuing these options for a cash boost can be a way to save your company from closure.