Untenable growth, unforeseen emergencies, unsound planning, or some other expensive mistake has drained your business of its liquid assets. The bad news is your business might not be long for this world. The good news is there are some last-minute tricks to get your cash back.
Without cash to cushion a surprise blow, businesses are almost certainly doomed to failure. Liquid assets keep the lights on; the employees paid, and all manner of business services in operation, which means you need cash to keep your business going. Here are a handful of solutions to help you regain the cash your business needs to survive.
The purpose of your business’s products is to bring in cash, so you should start putting your inventory to work. [pullquote]If your product isn’t flying off the shelves, you can encourage buyers by organizing discounts and sales that put cash in your pocket.[/pullquote] Plus, you don’t have to be in retail to find extra cash this way; you can offer markdowns on services for new customers or provide deductions to clients who are willing to pay subscriptions in advance. Though some of that influx of cash should be reinvested in the business, some of it can go straight to your cash cushion.
It’s easier and cheaper to ignore unpaid invoices, but delinquent payments eat away at your business’s bottom line. You should stay on top of potentially dishonest clients with strict payment policies and reminders. Following up after a project is complete can improve your likelihood of receiving payment without a fight.
Still, chasing payments is an expensive endeavor, especially when clients are reluctant to pay. Instead of letting yourself be cheated, you should get what you are owed by using invoice factoring. Factoring companies buy unpaid invoices from businesses, so you can get cash in your hand without having to wait until your client decides they will pay. Some of your clients might be prompt, while others drag their feet, but you can’t always afford to wait.
If your credit is good and you have some time to spare, you can approach your local financial institution for a business loan. However, if your business is close to brand new and you lack credit or collateral, you might consider applying for an SBA loan. SBA loans are quick and small, and the SBA tends to be flexible with term limits and amortization schedules. However, you do need to complete quite a bit of paperwork to earn your SBA loan, and the limit of $1.5 million may seem low to some business leaders.
A third option is merchant cash advances, which allows you to earn upfront, lump-sum cash ― for a price. Instead of repaying on a monthly basis, you allow your lenders to take a percentage of your credit and debit sales until your advance and interest are paid in full. Because cash advances have extreme interest rates, you should only consider this option if your business is booming and you need quick cash to meet demand.
Even after your business secures initial funding, you can reach out to investment firms ― including venture capitalists and angel investors ― for financial assistance. However, to be successful in courting investors, you need to develop a rock-solid pitch, have plenty of data on your business and have a staff advisory board perpetually searching for potential investors. You might also devote time to visiting various capital events, which are designed to connect businesses with investors. Connecting with investment firms is time, labor, and cost intensive, but it can provide an astonishing amount of cash when done right.
Friends, family, neighbors and even strangers might be willing to lend financial support to your business. You could privately ask loved ones for a small cash infusion, or you could organize a fundraiser for your business to excite and engage your community. If you would rather not directly ask people you know, you could manage a crowdfunding campaign online, which allows you to earn surprising amounts of cash for little investment. These methods work best if you don’t need much cash to get by.
Perhaps your last resort should be using your own savings to support your business. It is dangerous to entangle your personal finances with your business’s; before long, you might find yourself dipping into corporate accounts to pay for groceries or taking a home equity loan to try to resuscitate your dying business. However, if you are confident in your willpower, you can make a small, one-time transfer from your personal account to boost your cash cushion.
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