When running a business, no matter how large, you’ll need money in order to grow and improve your operations. However, when you’re a smaller business, it can be hard to find the cash you need easily. There are options out there though that can really help you finance your business and encourage your success. But with so many options it can make it difficult to make the right choice for your company. Here are some of the top ways you can inject cash into your small business!
Finance through borrowing
One of the most common ways small businesses finance their company is through loans. Borrowing finance can be an easy way to inject a lot of cash into your business at once and there are lots of different ways to do so. Taking out direct lender loans is an effective and tried and tested process, so it could work wonderfully for you. Alternatively, you could extend your business overdraft. This way you’re only borrowing how much you really need, lowering your overall debt. Similarly, you could get a business credit card that allows you to spend as and when you need it. When borrowing finance, you do have to be aware of interest rates and specified criteria. You could apply for funding, but your request may be denied. This is why it’s worth checking out lots of different lenders before committing so that you can find the one that’s right for you.
An option that doesn’t involve borrowing money is equity crowdfunding. This method has become very popular, especially for smaller businesses. Crowdfunding is where you ask for financial support from the public. Typically, businesses will offer something in return to those who fund them to help make it worth their while. You could offer things like merchandise, samples of new products, early access, or even shares in the business. People are more likely to back your crowdfunding as well if you’re a niche company in a unique market as you’ll be bringing something completely new to the table. It’s also important that you set a realistic goal as well. Setting one that’s too high can leave you disappointed and it can be impossible to reach it. On the other hand, setting one that’s too low might not actually benefit you much, so try to choose a sensible target that you believe will help inject cash into your business. You also don’t need to pay the money back, so crowdfunding is a debt-free way of injecting cash into your company. However, although the idea is great and it has worked for a lot of businesses, it’s not a guarantee so you may need to eventually source other forms of finance if you don’t reach your goal.
Equity finance is a type of investment where you hand over parts or shares in your company to an investor in exchange for money. You may also be able to call on these angel investors and ask for their expertise and knowledge to help your business grow even further. Equity finance can also help set you up for the future as your investor will most likely want to support you in all your endeavours as they hold a stake in the company itself. The only drawback is that you will lose some ownership of your company, so you’ll need to be prepared to give that up and allow decisions to be made jointly. Private equity finance can take a little while to get sorted, so if you need the cash as soon as possible, you might benefit from other forms of faster finance.
Merchant cash advance
If your business takes credit card payments from customers, then you may be able to get something called a merchant cash advance. The amount you can borrow is based on how much your monthly card payments total and are usually available from lenders that specialise in business finance instead of banks. The whole process of applying and receiving your advance is typically a lot quicker than a bank loan as well. A cash advance is also generally paid off a lot quicker than a loan too as your repayments are decided based on your credit and debit card revenue each month. This gives you the chance to have flexible payments so if you have a quieter month, you pay back less than you would in busier months. Cash advances also don’t require you to use a form of collateral or put your own assets on the line, making them feel a little less risky. If you want a quick injection of cash that can be paid off quickly, then a merchant cash advance can be just the thing.
An alternative method of funding for small businesses is grants. A lot of these have been designed with small businesses in mind and they offer you a way to have some extra cash without going into debt. Some of the grants will be awarded by the government but there are a fair number of schemes in place to try and support independent companies. There are a lot of different grants out there too which means there’s a huge amount of information at your fingertips. You’ll need to do a lot of research to make sure you choose the right grant as some of them have very strict criteria. The only downside is that you may not be successful in your application and might not be awarded the grant. So, if you’re relying on a grant to help bring some money in, then you could be disappointed. Some grants aren’t able to be renewed either, so once the money is gone, you’d need to reapply for another one or look at other means of finance. Most grants also request a very specific breakdown of how you wish to spend the money as the awarding body needs to make sure it’s being put to good use. Once you give them your plan of how you’re going to utilise the grant, you may not be able to stray very far from it either. However, if you’re lucky enough to receive a grant, it can actually help to boost your business profile as well as give you some cash. Being awarded a business grant helps to get your name out there and also shows your credibility as a company too.
Funding your business can be tough at times, and you may not know where to turn when you’re in need of cash. However, there are lots of options out there to really help get your small business to where you want it to be. You do need to be aware of the options you have and how likely you are to receive them. It’s no good trying to crowdfund if you’re not actively promoting your business, just like it won’t be useful to source a business grant that can take weeks to be processed if you need the cash in a few days. Try weighing up the pros and cons of each so you can make the best decision for you and your business. You’ll soon be able to find the perfect solution that will enable you to inject the cash you need and keep your success going.