Small businesses tend to struggle with their cash flow for the first few years. According to experts, the average small business generates over $71,000 a year but many don’t make that much at all. A staggering 86 per cent of small businesses make fewer than $100,000 a year. While this may seem comfortable for an individual, small business owner has to pay their employees, their suppliers, and sometimes, the loans they used to prop up their business. These constraints often lead to small businesses developing cash flow problems and may even put their entire operations in jeopardy. This is why foundations such as the Crewe Foundation in Utah exist – to stop small businesses from going under.
Today, learn how you can raise funds for your small business and increase its financial stability.
Get a Partner
A business partner does way more than just share the administrative burdens of your small business. Sometimes, business partners are chosen not only for their ability to make smart decisions and bring new ideas but also because they can secure new customers or lines of funding. For example, an experienced Uber accident attorney at a law firm may be made a partner not just because they have a stellar record in court but also because they have a long list of loyal clients who have them on retainer. In more traditional companies, a partner can use their own investments or connections to other businesses to help secure the finances of the enterprise.
Secure a Microloan
If you aren’t quite ready to share your business with a new partner but you don’t want to put your enterprise into hundreds of thousands of dollars in debt, you can always look for a microloan. These financial obligations sometimes range from a few hundred dollars to tens of thousands of dollars.
These loans are specifically tailored to provide small businesses and enterprises with cash but not saddle them with crippling debt. You can apply for a microloan in many banks and cooperatives, but you could also try applying at the U.S. Small Business Administration. Microloans can help pull your business out of hot water and have very reasonable interest rates.
When you have no other options, you can always raise the money to keep your business afloat by digging into your personal finances. There are plenty of reasons this is highly discouraged. First, in case your business does not survive, you will personally be in debt. Second, unless you are well-off, it is unlikely your personal finances will be able to pay for all your business expenses. But if you really need the money, there are some ways you can bootstrap without putting your future at risk.
You can sell off unnecessary property. This could be a second apartment, a second car, expensive appliances you don’t use, and the like. Or you can use a portion of your personal savings to help keep the company afloat for a few more weeks. Just remember that bootstrapping should only be done as a last resort.
Go to a Bank
If microfinancing and personal assets are not enough to keep your enterprise afloat, you may need to go to a bank for a proper business loan. These tend to be worth hundreds of thousands of dollars, more than enough to help fuel a small business. However, they also put a large burden on you since repayment will be much more difficult than with a microloan. If you want a bank to approve your business loan, you will need to make them confident in your enterprise. Show them you have a solid plan going forward and how exactly you plan to use the money you’ve borrowed.
Find an Investor
Finally, you can always try to drum up finances by looking for an investor. Unlike a partner, who is active in managing your business, an investor usually provides the money in exchange for ownership. There are many types of investors, from angel investors to venture capitalists, who are more interested in discovering the next big thing. Finding the right investor can be difficult for a small business, especially if it’s independently owned and operated.
A profitable Subway franchise will have more weight than a struggling small business. If you want to impress investors, so they’ll financially support your company, show them the possibilities. Whip up sales projections for your products or showcase how their money can help you expand your operations. Once they see the potential in your business, they’re more likely to pitch in financially.
Cash flow problems can be serious to any business and you need to address them the moment they begin to manifest. These methods can help you avoid going too deep in the red or even closing your business for good.