Short-term Funding Options for Your Small Business
The recent U.S. government shutdown forced business owners across the country to start thinking on a larger scale about what they can do if they find themselves in need of short-term funding. FundThrough outlines the options every business should have on the tips of their tongues.
No one ever said running a small business was easy. During the recent government shutdown, many small and medium-sized businesses found themselves scrambling to find funding. This mad dash was precipitated by the delay of Small Business Administration loans that were stuck in limbo. Thankfully, the SBA is back on track, but businesses are understandably still wary of crippling cash flow issues following the ordeal.
The government shutdown was an extreme example. However, a deeper understanding of short-term funding and the available options can make all the difference in the success of a business. This is true whether you’re in between payments or if government services come to a screeching halt.
Knowing When You Need Short-term Funding
It’s important to understand that short-term funding is more than a last resort. It’s a perfectly normal business practice that helps small businesses continue to operate at peak efficiency.
There are all kinds of reasons why a business might require short-term funding. Most of them have nothing to do with a governmental crisis. Frequently, companies might find themselves in need of short-term funding simply as a matter of doing business.
A Business World That Won't Wait
Cash flow gaps can arise for all kinds of reasons. Chief among these is the way in which larger corporations arrange payments. Purchase orders are frequently made on net 30 or net 60 terms. This means small businesses find themselves with no other choice but to wait months for invoices to be paid in full.
Unfortunately, while small businesses patiently bide their time until they are paid for their goods or services, the world keeps turning and bills keep piling up.
The hard truth is that much of the business world is indifferent to the cash flow gaps of a small business. Lenders are frequently just as strapped as the people they lend to and are unable to extend the leeway these businesses need, even if they wanted to. Of course, that’s provided a small business can qualify for a business loan in the first place. Business loans have not been easy to find of late, and banks continue to remain cautious, despite the strong economy. On top of that, the process can take so long that a business loan is often too little too late for small businesses.
Sourcing Proactive Solutions for Short-term Funding
Thankfully, there are options available for businesses seeking short-term funding solutions. The key for a small business is determining which option is right for their business and understanding what they’re getting into.
Merchant Cash Advance
A merchant cash advance (or MCA) can be an attractive option for small businesses that find themselves unable to qualify for a traditional bank loan. An MCA is an advance of capital based on a percentage of future sales. When you take out an MCA, you’re essentially “selling” a percentage of all your credit or debit card sales until the amount is paid off.
However, it’s important to be apprehensive of MCAs as the industry isn’t well regulated. A business is also agreeing to give up future sales that it could find itself in need of at a later date.
More businesses are beginning to look toward invoice financing as a viable and reliable option to provide the cash flow they need to keep things running. Invoice financing is a practice that gets businesses the money they need on a timeline that works for their business.
FundThrough advances small and medium-size businesses 100 percent of their invoice value in as little as one day. The business pays back only the money that they actually spent, plus a nominal fee. Invoice financing can also be advantageous for small businesses because it provides necessary capital without affecting the credit score of the business owner.
Lines of Credit
A line of credit can be a valuable resource for SMBs looking to cover short-term expenses. This could include everything from covering day-to-day operating costs to finding the extra money needed to buy supplies or inventory.
A line of credit works much in the same way as a credit card, but the application process is a bit more complicated. The most important thing to remember is that interest must be paid on any capital that’s borrowed. While the amount of interest owed is often lower than a typical credit card rate, it’s also higher than a prime lending rate.
A small business never knows when it might require short-term funding to help it cover unexpected expenses or bridge a cash flow gap. When these situations do occur, FundThrough is there to provide an easy and convenient short-term funding solution that works on your terms. See how short-term funding works and how your business can take advantage of this modern-day solution to an age-old problem.