Once you have your small business up and running, you hope that is the end of financing and that your business will support itself. In the first few years, however, small businesses will sometimes need influxes of cash to stay open. You may need to purchase materials to complete a large order, cover payroll for a week when AR is behind or perhaps even have a bill or two to cover a gap in cash flow. Luckily there are a variety of small business loans available for businesses to keep their doors open and products moving.
1. When invoices are due and no one is paying
Accounts receivable financing is an option for small businesses that are owed money and have not been paid. Agreements with these companies result in a cash advance that they then collect from your customer directly. This can allow you to get money even if the invoice is not due for 30, 60 or 90 days. The gap is covered by the AR financing company and after a small fee you’re free and clear. This is a great technique if you have a customer you’re afraid will pay late since the collections burden will not be on your company.
2. When you need materials to fill an order
Small businesses that need to spend big money on materials to fill a guaranteed order are great candidates for a business line of credit. This is money you can continue to use as you need it so that you don’t have to panic when you need to fill an order. Banks like to offer money this way because there is a great rate of return and for your business it means you never have to say no to an order that can bring in an influx of cash. Since you only pay interest on the money that you use, it has savings over the costs associated with a small business loan.
3. When you need to keep the lights on
A small business credit card is a great option for businesses that just need to pay daily expenses without the hassle of a large loan. With a credit card money is accessible quickly, and you can often establish an account with little documentation or hassle. You’ll want to keep on top of these bills to ensure your business remains credit worthy since other companies may take a look at that data before agreeing to do business with you.
Funding Is Necessary to Successfully Run Your Small Business
Whether or not you want to go down the road of securing additional financing, the bottom line is that your business will need cash to keep moving. By understanding the financing options available, you’re in a better spot to make a call about what kind of money to borrow and how to pay it back. If you believe in your business, make sure it has the money to survive.