Every business has financial needs that range from starting up to acquiring inventory, marketing goods, increasing production, and operating daily. That’s why a positive cash flow is essential to meet all these needs and keep the business running. But for new and small business owners, managing their incoming and outgoing cash is a perpetual struggle.
It should be noted that cash flow problems are common in small businesses despite constant and thorough planning. Fortunately, there are several places to go when a small business needs fast cash. The key is to know where to look to avoid the risk of putting their business’ finances into more trouble due to higher interest rates and a slow approval process.
Thus, we’ve highlighted the following top sources that are worth considering when you need fast cash for your small business.
An outstanding invoice is a payment that your customers have yet to pay. It can be a source of fast cash when you can collect the payment on time. To make it possible, keep sending out a friendly reminder to your customers before the actual payment due date. It might help you get the payment when you badly need it.
But if it still doesn’t work, seeking legal action can be an option. Although many don’t want to do this because it’s time-consuming and expensive, it might be worth trying if you can find a small business lawyer with reasonable rates. Sometimes, a letter for unpaid invoices with a threat of legal action is already enough to drive people to pay.
Aside from taking legal action, you can also use your business’ outstanding invoice as collateral. You can sell it or other accounts receivables to a factoring company through receivable financing, often known as factoring. In as little as one day, you may get a fast advance between 50% to 90% of your total invoice amount.
This type of financing can be hefty, but it’s a good solution to account for outstanding payments or cash flow problems in certain situations. For instance, you need cash to make payroll next week. With receivable financing, you can get 90% of your invoice paid right away. It’s a more reasonable option rather than waiting 60 days or more to get the full amount.
Business Cash Advance
In addition to your business invoices, you can also sell your future sales to get the cash you need quickly through a business cash advance. Since this is a short-term solution, repayment usually begins immediately. You would remit a fixed percentage of your future debit and credit card sales until you repay the principal and the interest.
With a business cash advance, the payment is dynamic as it is usually made at the end of each business day. If your sales are higher, you can allocate more on the payment. And if it’s lower, less is paid on a business day while you still have cash available on-hand to boost your sales on the next day. It can be more beneficial if you have strategies in budgeting allocation.
The Small Business Administration has a microloan program for small business owners. Through its approved microlenders, you can borrow up to $50,000. But unlike traditional lenders, microlenders are much more concerned about your passion and commitment to your business. If you can show them a well-thought plan, you’re likely to get the funds you need.
This financing can be an excellent choice when you only need a small amount of cash to meet your business’ needs. If you need less than $50,000, you may not be able to borrow from traditional lenders. But with microlending, you can get the fast cash you need regardless of your credit history and as long as you can demonstrate your business’ potential.
Online lenders are favorable alternatives to banks and credit unions. Instead of waiting for weeks or even months, you can get the fund you need through online loans in just hours or days. Besides a quick approval process, online lenders may also offer better interest rates and smaller services fees.
Thus, if you need fast cash for your small business with a higher chance of approval, getting a loan from online sites like creditninja.com might be the right choice. You’d be able to save a lot of time since everything is done online.
Using personal funds might be the first or last option that you would try if your business experiences some cash flow problems. However, many business owners borrow from their personal funds to keep their business operating. If you have enough personal money, it might be a smart move as you won’t necessarily have to deal with interest rates.
But like any option, it might have some drawbacks leading to potential problems later on. Although you won’t be pressured to repay the money, you have to pay yourself as if you’re borrowing from a lender. But as much as possible, avoid relying on your personal funds whenever you have cash flow problems.
It might be relieving to know that there are many resources you can go to if you encounter any cash flow problem in your business. However, these are all temporary solutions. Aside from seeking the money you need to keep your business going, you must have a concrete plan to protect your business from a cash-flow deficit.
Josh founded Money Buffalo in 2015 to help people get out of debt and make smart financial decisions. He is currently a full-time personal finance writer with work featured in Forbes Advisor, Fox Business, and Credible.