The most essential resource for any business is cash. There is little point in creating a business that turns over millions if you lack the short-term cash to keep the lights on. As a result, many small business owners find themselves in a position where they need to finance the short-term. Finding sources of funding for your venture can be a challenge, even with a proven trading record, and entrepreneurs need to be creative in exploring opportunities to raise the cash they need.
Businesses depend on a flow of cash in order to fund their daily activities. Depending on the sector and the size of the costs you are facing, this can be a serious concern. Cash flow problems are the number one reason businesses fail, and even fundamentally sound concerns can find themselves easily falling short. Particularly in the early stages of the business, keeping the cash flowing in to meet outgoings is often the primary focus of the owner.
Small businesses lack access to the same borrowing opportunities as larger businesses. It is much more difficult to raise equity funding without finding a specific individual to work with, and lending is also made much trickier by the demand for personal guarantees. For those who need the money, the question then becomes how best to source funding in order to achieve their business objectives.
Loan funding is one option. Businesses that can negotiate viable terms with a lender can get quick access to the funds they need. However, this is often wrapped in personal liability, and in recent years even the most liberal lenders have been forced to turn away otherwise perfectly good businesses.
For others, sale and lease-back agreements on real estate and machinery can help unlock capital already tied up in the business, although this is far from sustainable as a long-term funding source. This type of funding mechanism only applies to those businesses that have existing fixed assets, and as a result is often less appropriate for newer entities.
Others choose to work with their current assets in order to unlock future sales and cash for more immediate use. For businesses that take card payments, finding ways to unlock future sales can help solve funding problems. Companies like afnllc.com provide ways for businesses to raise finance against the value of future sales.
Options of this sort prevent the need for loans and security, and prevent the need for further equity dilution. This means that businesses can raise the funding they need without adversely affecting the owner personally. Solutions of this sort provide businesses with the more flexible arrangements they need to meet a variety of cash flow challenges.
When your small business needs funding, it is important to make the right call on how to meet that demand. Loan and equity funding have their own disadvantages. For those who want to keep costs to a minimum and retain the same share of ownership in their business, more constructive arrangements over current assets can be a viable way to raise the funds they need.