It happens at some point to almost every small business owner – you need cash, and you need it now. Your business is doing so well that you need to hire more bodies immediately, or sales weren’t up to projection, or a project you were counting on was canceled. Whatever the reason, a cash infusion is the only solution that will take care of your problem. But how do you go about getting financial help for your small business?
Traditional Sources Aren’t Fast or Reliable
If you’ve ever gone through a bank to borrow money for your business, you know that they tend to take their sweet time to provide you with access to funds. That’s if they approve you at all. Banks have very high standards for creditworthiness, and sometimes just being in business for less than five years is all it takes to get a rejection.
Bank loan requirements for business can be strict, and require substantial documentation. You’ll also need a good business credit score, as well as a good personal credit score to be considered. Then there’s the matter of collateral. If a bank decides that you are high-risk and still approves you, they will demand collateral to make the loan.
Going through the Small Business Administration or a similar local small business initiative might be attractive, but again you run into issues with timing. You have to write a proposal, and wait for it to be approved. That can take months.
So how do you get over your cash flow hump quickly enough to do you any good in the short term when you need it most? Let’s look at a few ways to raise cash for your business in a hurry.
Fast Small Business Loans
Fortunately for small business owners, there are several ways to obtain fast small business loans without going through a bank or traditional lender:
Your business or personal credit card can definitely help you through a rough time. However, if you need to pay your employees, getting a cash advance on a credit card that’s big enough to meet your business needs can be a hassle.
The cash advance limit on your credit card is usually capped at a few hundred dollars. If that’s all you need to tide you over, then you might have found your answer. Just remember that you’ll be paying interest on top of the cash advance fee for the amount you advanced.
Line of Credit
If you have a line of credit at your bank already in place, then drawing on it when you need short-term cash is a possible solution. There are caveats, however: most banks require at least $75,000 in annual revenue and a two-year business history as well as as a good business and personal credit score to approve a line of credit. It can also take at least a week to get the funds, and you’ll pay up to 32% on the money you borrow through your line of credit. If you need cash faster than that, or don’t meet the requirements, then you should consider looking elsewhere.
Personal Short-Term Loans
If you just need a very small amount to bridge the gap, then a personal short-term loan might be right for you. These loans, much like payday loans, are incredibly expensive options, so if you choose to take advantage of them make sure that you can repay the full amount on or before the date when the interest really kicks in. Letting one of these loans go for too long can cause a bigger problem than it solved.
Home Equity Loan
Many small business owners end up tapping into their home equity to help their businesses through a tough spot. This can be an attractive option if you have equity, and have personal credit that’s sound enough to get a loan through a bank.
However, if your business isn’t just going through a rough patch but is actually struggling, you would be putting up your family’s home as collateral for your future success. Many business owners are hesitant about betting the actual farm on the outcome of a business venture.
Microloans are, unsurprisingly, small loans that typically cap out at $50,000. They can be easier and faster to get than bank loans. The Small Business Administration runs a program with 150 approved micro lenders.
Of course, even if these loans are faster than bank loans, they still might not be fast enough to help with immediate cash flow challenges. Also, with their upper limit of $50,000, they might not provide enough cash to help you out of your current situation.
Merchant Cash Advances
A merchant cash advance is a cash payment in exchange for a set portion of future debit and credit card purchases. You get the cash you need, usually within 24 to 48 hours, and then have a daily debit from your bank account set to a percentage of your day’s credit or debit sales.
There are several benefits to merchant cash advances:
- Nearly instantaneous funding that goes directly into your business bank account
- Poor credit is not an issue
- You can be approved even if you have outstanding loans
- Funding amounts up to $500,000
Financial representatives will work with you to find the plan that makes the most sense for your business. There are really only two hard and fast limitations – you have to have been in business for one year, and your monthly revenue has to total at least $15,000.
Get the Cash You Need
When your options are limited and your need is immediate, often applying for a merchant cash advance is a sound choice. While there are other sources of funding, as detailed above, they typically come with caveats that make them less than ideal for an urgent situation. Contact Horizon Business Funding to get a business cash advance that works for you.