Companies everywhere are looking for financing to help keep their operations afloat. After auditing your finances you might be looking for a few creative financing options that are budget-friendly.
Below, 13 business executives share their creative financing tips for a business looking for funds.
Traditional Bank Loan vs. SBA Loan
A traditional bank is typically going to have one loan product and make one loan offer to you that may or may not match your needs. A traditional bank loan usually requires some money down, a deposit, to obtain the loan. This defeats the purpose if you’re trying to keep your business afloat. The SBA offers many different types of loans. They offer traditional loans similar to a bank, but with fewer initial obstacles. They offer investment capital loans and can introduce you to investors that specialize in helping companies in your industry. They also offer disaster assistance loans should you find your business suffering due to a disaster. Many people think the SBA is a long and arduous process, but they’ve streamlined their loan review and their main goal is to help small businesses.
Find an Angel Investor
In the Covid-19 stay-at-home environment, many entrepreneurs are looking for capital to fund their ideas, and many investors are looking for ideas to fund. Angel investors invest in companies in the start-up phase of a business. Historically they are usually friends and family of the founder. Over the last decade or so, networks of angel investors have cropped up in almost every city in the US. Early-stage investors will invest in an idea in return for a share of the company you are starting. Typically the best terms will come from people that know and trust you. Since the business has yet to prove itself, friends and family are likely your best bet for start-up capital. If you don’t have people in your life with the wealth to invest in your idea, you should contact your local angel investor network. At the very least they can provide you with the resources you will need to build a business plan and the materials that you can present to potential investors.
Credit Card with Temporary 0% Interest Rates
While these hard times will prove to be temporary, some companies need financing until business begins to pick up again. If you are in need of a short term option to finance your business expenditures, there are several business credit cards available that charge 0% interest on purchases over the first couple of months.
Online lending services
Online lending services are an attractive alternative to traditional bank lending. They offer speed, ease, and convenience to get the learning your company is in need of. Do your research beforehand and find out if this is a good option for you.
Pay Cuts Instead of Layoffs and Furloughs
Rather than laying off/furloughing your employees, consider company-wide pay cuts to keep everyone employed in your company instead of contributing to the rising unemployment rate.
Anthony Basuil, Technical Recruiter
Incentivize Early or Upfront Payments
Cashflow is a major challenge for most small and medium-sized businesses. This problem is compounded when services are rendered under unfavorable terms such as NET 60. A simple technique that we started implementing is an incentive to pay early or upfront. Shortening that window made sequencing resources significantly easier.
Don’t Settle For One Solution
Renegotiate all unsecured debt or liabilities immediately. Free up cash flow from all non-essential business operations. Repurpose infrastructure or talents where possible to near term problems that can help solve COVID19 problems. take advantage of the fact that all pretense can be let go of “looking good” because every single human and company is dealing with this crisis, so nobody cares what it looks like to make pragmatic choices. Humility is a virtue and a strategy today.
Fundable and Kickfurther
I love Fundable and Kickfurther. These platforms connect you to two different groups of investors depending on your business model and company stage of life. What is great about Kickfurther is you’re gathering capital to fund your next inventory order. After your product has sold, you do a payback. It’s pretty lucrative and serves as an additional marketing tool.
Bridge loans can be a savior if you’re in the middle of a construction project and you lose funding. The reality is, however, sometimes banks and even private lenders just say no. If that’s the case, you have to consider more out of the box methods like crowdfunding. Or, if you’re really clever you might be able to find a business credit card that has 0% interest over the first say 3-9 months. That could give you a window of funding to save your business.
Consider Venture Debt
This really depends on the stage. As a former venture associate, I love the adage that customers are the best source of financing. If you can make debt work, then make debt work. The longer-term, the better at this point. Venture debt appears to be a growing source of potential capital, and one that I’ve been enthusiastic about for years.
Don’t Rely on CARES or PPP
Federal assistance packages are offering some help, but appear to be far from perfect. Despite the media coverage given to the CARES Act and the Paycheck Protection Program, a number of SMBs are unsure of the program’s specifics and whether or not they’re eligible to participate. For example, while 95 percent are aware of the CARES Act, 27 percent don’t know whether they can apply, or if they will. By April 6, 40 percent of SMBs had attempted to apply for PPP funding, but 20 percent of those were unable to complete the process. Sixty percent said the loans are difficult to access. The initial round of funding for the PPP has been exhausted, but negotiators were reportedly close to a deal to infuse $310MM into the program.
Work With Thriving Industries
Find industries and clients that are thriving during Covid-19 and offer them your services. You may want to do this for free (as well as helping your existing clients survive this with you for discounted rates). Set yourself up to be the partner who was their safety net.
Noah Wisnia, Head of Talent
Find Other Services You Can Offer
Think of other ways your business can operate. For example, restaurants are selling their wholesale produce to people as it would go to waste otherwise and people want to avoid going grocery shopping – so it’s a win-win.
Sarah Lysecki, Content Strategist