Build Up Business Capital in 6 Ways
Running a business takes money, but sometimes having cash on hand isn’t always an option for many small businesses. When your small business runs low on cash, there are other ways to get the business capital you need to pay for that new inventory shipment or cover payroll.
Invoice factoring and accounts receivable financing is an option for many small businesses. The benefits are that the business does not accrue any more debt. The factor or lender uses the company’s pending invoices as collateral for the funds. You get the cash you need up front without having to wait for your customer to pay. Once the payment is made, the factor takes their fee and the rest goes to the business. Accounts receivable financing handles the customer billing automatically taking their fee off the top, while factoring allows your business to continue billing and sending the factor the fee upon collection of the amount owed.
Another way to obtain business capital is with a business line of credit. This may be a good option for those businesses with excellent credit and good financial history. A business line of credit is an unsecured form of financing, but the plus side is that you don’t have to pay on the credit line until you start using the funds. With each payment, the credit line returns closer to its original amount.
Vendor credit or trade credit is common across all businesses. The vendor often offers anywhere from thirty to ninety days to repay the invoice. Some vendors offer extended balances where the small business pays some but not all the invoice at once.
Business credit cards offer owners with decent credit to pay for necessary expenses similarly to a consumer credit card. Credit cards should be handled with care. Just like with a consumer card, late or missed payments can increase interest rates. Many business credit cards have higher interest rates at the outset, but the tool is widely used for obtaining business capital quickly without having to apply for financing.
If your business offers credit cards and has a reliable offer history, a lender may offer your business merchant cash financing. A percentage of the credit card sales goes toward the merchant until the cash advance is paid in full.
Obtaining business capital can be a necessary thing for business owners to do. These six ways offer businesses different ways to obtain that capital to make payroll, pay for supplies and keep their business operating smoothly.