Businesses get into a rut. There are times when businesses do everything right, and then all of a sudden, they're struggling to maintain their cash flow. When an opportunity comes along, it's important to be able to raise cash quickly for your business.
And every business owner knows that there's nothing fast about a traditional loan.
FedEx famously found itself in a similar situation. The company was facing demise, and the owner did what any logical person would never do: he took the company's last $5,000 to Las Vegas and played blackjack.
FedEx was on the brink of bankruptcy due to rising fuel costs. The company was so desperate that they had pilots use their own credit cards to fuel planes and even asked employees not to cash their checks.
Today, the company is responsible for the delivery of 1.2 billion packages in over 200 countries.
But for the normal business owner, there are alternative ways to raise cash fast to keep your doors open, lights on and operations running smoothly.
1. Cash Advances
Payment solution providers want your business to suicide. When it comes to business cash advances, they work like this:
- Merchant account companies offer advances
- Future credit card sale receipts are used for the advance
Businesses are required to pay back the advancements using future sales. These advancements have evolved over time with more favorable terms and options. Line of credit is a common term used for cash advancements that allows you to have access to a specific amount of capital that remains available for a set period of time.
If you have a line of credit open, you have access to that money at all times.
2. Auto Equity Loans
Your car has value, or equity. Older cars, unless they are classics, are worth far less than newer vehicles. How this works is that you'll seek an . These loans are not based on your credit, but the value of your vehicle.
Vehicles that are newer and have a higher value will allow you to take out a higher loan.
Your auto's title will act as your credit. You'll get cash for your title, and if you repay the loan, the title reverts back to you and everything resumes as normal.
Crowdfunding is trendy, and a viral campaign is enough to fuel most business operations. The investments come from individuals, so there is going to be a lot of micro donations that go to help your business develop products, conduct research and development and so on.
Your main options for crowdfunding are:
Investors on crowdfunding sites do expect a return, and this return is often:
- First access to your product
- A free product
- Bonuses of some kind
You'll even find authors using these platforms to self-publish their books. In return, the investor will often get a free copy of the book, or they may receive a signed copy of the book.
4. Vendor Credit
If you've been working with the same vendors for a long time and have always made payments on time, they may be willing to offer you vendor credit. Credit is only provided to good customers, but these credit options may include:
- Pay on scan, or when a customer buys the inventory
- Favorable repayment terms
- Case-by-case loan negotiations
Vendor credit is always something to pursue if you need to fulfill orders and don't have the capital to buy the products directly.
5. Invoice Factoring
Factor invoices aren't for every business, but it does provide a way to get cash-in-hand quickly. The idea is that your business may have large, outstanding invoices that can't wait to be paid.
Factoring includes a factor's fee, often 10% of the invoice.
So, instead of your business waiting for net-60 terms and not having the money to pay employees, you can receive 90% of the invoice from the factoring company. It's a smart idea to at least consider invoice factoring if it means keeping your business's operations running smoothly.
Yes, you'll have to give up a chunk of the invoice, but it's worth the sacrifice to keep operations running smoothly.