Almost every business owner has struggled at some point in their business life with cash flow and access to business capital – whether at startup, when they are developing the company with no revenue, facing difficult financial times, or even growing rapidly and dealing with the lag between processing a large order and getting paid by customers. Cash flow, in any business, is always king!
We’ve dealt with many, many early stage clients facing this dilemma, and we’ve helped a majority of them obtain the funding they needed by creating a world class funding package (business plan, financials, presentations, and other collateral material), and then getting them in front of the right investors, both small and large.
Sometimes, however, it’s just a small amount, a lifeline, or a short bridge to cover a certain operating gap. With that, we present these five alternatives:
1) Crowdfunding Debt – we’ve all heard volumes about rewards-based sites like Kickstarter, and other equity-based crowdfunding sites, like AngelList. Yet often overlooked are the debt-based sites like Kabbage, Prosper, and Lending Club who offer small business funding. These sites will lend money, often at about half the rates of credit cards, for a variety of business and personal needs.
2) Leasing – many companies fail to look into leasing equipment versus burning huge chunks of capital on purchasing equipment. This cash saved can be used to keep the business going, saving valuable resources for operations. With real estate, you can often negotiate what’s called a “graduated lease” – less money in the early years with more on the back end.
3) Bartering – need services, but can’t afford to pay for them? The bartering economy is alive and massive. Don’t be afraid to float this idea to your vendors, and even your customers. They may have something valuable to provide to your business. Creativity is key!
4) Grants – there are often local, state, and national grants available depending on the type of business you’re running. These are incentives to promote certain kinds of businesses or certain kinds of owners, and they generally don’t have to be paid back. Your local Chamber of Commerce is generally aware of local opportunities, and grants.gov covers national opportunites. Beware, however, of companies offering to guide you through the grant process – most of them are scams.
5) Factoring – If your business is a going concern and you have a significant amount of receivables or inventory, there are a number of companies who will lend you money against these assets to provide you with much-needed cash flow.
As always, have a solid business plan and cash management strategy is critical to any business. For more information, please visit us at www.BlueHorizonVC.com.