How to get instant access to capital and cash flow.

July 25th, 2019

It’s hard to build a business and perhaps the biggest challenge is to get access to capital to fund their growth plans. Having a great product or service is not enough if you can’t find the resources to bring it to market or get more customers. How is it possible to find the right financing solution when you don’t have a big cash balance on your balance sheet? Below are some options that you can use — some are riskier than others, some take more time than others, and some are a bit harder to get approved for:

  1. Consider outside investors. If you have a sound business model and a few clients that love your product and service, you can try to attract outside investors, whether its friends & family or professional investors such as venture capitalists. This route takes time and will require patience. Additionally be prepared to give away ownership in your company and if you decide to keep raising capital from this source, there’s a risk that you’ll end up losing control of your company and destiny.
  2. Use credit cards. For scenarios where you’re short on cash flow and need immediate financing, but the amounts are small, credit cards can be a viable alternative. But keep in mind that interest rates there can be often high and if you can’t repay your balance on time it can hurt your business credit rating. Banks, lenders as well as suppliers and vendors take a look at your business credit profile when they extend you financing and terms.
  3. Apply for a bank loan. Talk to your bank and see if you qualify for a line of credit. Often times the requirements can be hard to meet and may require you to put up a personal guarantee depending on how your business is operating.
  4. Offer your clients a discount to get them to pay early. If you’re extending net 30, 60, or 90 day terms to your customers you can incentivize them to pay you earlier if you give them a discount on the invoice amount. One structure might be offering a 2% discount if your customers pay within 10 days. 1% net 10 is an example of offering clients a 1 percent discount on the invoice for payment within 10 days.
  5. Extend your payable days to your suppliers & vendors. If you’re going to extend your payments to your suppliers help them get their money faster from somewhere else. For example, you can work with AuraRise to extend your payment terms to your vendors and AuraRise pays your suppliers within a few days or within the terms they want. It’s a win win.
  6. If you have receivables accounts, you can try to finance those. In point 4 above, we talked about offering your customers an early payment discount. Anothe option is to use invoice factoring — rather than waiting to get paid for 60 days on invoices, an invoice financing company advances you the money within a few days for a nominal fee and then goes and collects the money from your customers. You might not want to have a 3rd party intervene in your customer relationships but this option does provide you with an immediate source of cash flow.

As a business owner, you must be thinking all the time how to have the necessary resources to run your company. Having the right financing solution for your business is critical otherwise it could hurt your business in the long run. Feel free to reach out and talk to us so we can provide you with some ideas on how to navigate the financing landscape.

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