The effects of the coronavirus pandemic are being felt by businesses all over the world. Businesses are struggling to maintain healthy cash flows, which has left business owners the world over scrambling to keep their businesses afloat. With little or delayed income, businesses must find other ways to finance their operations and keep going. This has necessitated the need for outside financing with businesses looking for favourable options that will carry them through the pandemic. Below are some options you should consider if your business is among the ones struggling.
Businesses should start by finding internal financing before looking elsewhere. The best way to do this is by cutting some of their costs. Sadly, most business owners choose to lay off some people so as to keep their businesses afloat. Even though this is common, it does not mean you cannot find ways to finance your business without laying people off.
Businesses can start by cutting down on unnecessary spending. For example, most businesses do not need auto insurance right now so that is a cost they could do away with. Next, they could save on lunches, power, water and office space by mandating people work from home. Lastly, they can use software to handle things like accounting and inventory management. Doing this has been proven to save businesses huge sums of money.
Securing a Business Loan
A business loan is one of the best options for struggling businesses. There are lots of different options but ideally, you should try to get a small business loan first. These loans usually have favourable interest rates and repayment options. If your business has good credit, you could always go to a traditional lender to get the loan you need. Depending on your business’s history and how good your finances look, you can get enough to cover everything including payroll and inventory.
One thing a lot of business owners do not understand is that if their business is a sole proprietorship, lenders will look at their credit score before extending them a loan. In such a business structure, the business owners are responsible for all their business’s obligations, including loans and debts. Therefore, if you are having a hard time getting a business loan and have a bad credit score, you should find ways to improve it.
You can find advice on how to do that at newhorizons.co.uk as well as information on lenders who provide loans for bad credit scores. New Horizons does this and more as it is a leading loan introducer whose technology helps people find the right loan. They work with leading lenders to help you find the best rate online. Once you apply, you will find out of you have been approved instantly, and you can then get a loan in as little as 15 minutes.
Accessing Grants and Emergency Loans
Many government and private organisations are offering various levels of business support through loans and grants that are geared towards helping small businesses keep going. A simple search online will reveal which agencies and organisations can give you the financing you need. Ensure you look deep enough, so the option you end up with provides favourable repayment options as well as enough financing for everything you need.
Liquidating assets is another way to get your business the financing it needs. Many businesses have assets they are not using right now, like buildings, offices, and equipment. To find out what you can and cannot use to finance your business, make a list of all the assets your business has. Once this is done, divide them up into a list of essential and non-essential assets. Essential assets are ones your business cannot do without, like your headquarters building, and non-essential assets are the opposite, like one of two of the same type of equipment.
Remember that if you do not want to sell your assets, you can always lease them out to other businesses. Position your assets in a way that makes them cheaper for business to lease them rather than buying their own to ensure they can be leased at an affordable cost by other businesses.
Founders see venture capital as a viable way to finance their businesses in the growth stage. Even though this is a great option, it is not ideal for every business. The ability to attract a venture capital investor depends on your growth potential, the size of your active market, and enough capital to fund the initial growth stage.
If you meet all these conditions, be prepared to spend some time looking for investment partners. Many of them are wary of investing right now because of the pandemic. Remember that you will need to give up a part of your business, so be sure that the partner you choose shares our vision and that all of your interests are aligned.
Getting this kind of backing typically takes up to 6 months, but in trying times like these, it might take even longer.
Friends and Family
Going to family and friends has always been a popular way to get financing for a small business. Depending on your arrangement, you can get the financing you need as a loan, or you can exchange the amount you get with a percentage of your business like you would in a venture capital arrangement. It would be best to hold off on this option because a lot of people might be struggling themselves and might, therefore, have nothing to offer your business.
Peer to Peer Lending
Peer to peer lending has been around for decades, and it involves pitching your business to peers who decide if they would like to give you money to finance it. Sometimes, it involves telling a group of people how much you need and seeing if anyone will lend you the amount or some portion of the whole.
Peer to peer lending networks lend to individuals, so know that you will be responsible for the loan and your business will not. Even with its strict conditions, it is a good financing option because peer to peer lending does not require you to put up any collateral.
Using credit cards to finance your business is very risky but can be an option if you do not see any other opening. Here you have two options; using your personal credit card or a business credit card. Your personal credit card, because it likely has a small credit limit, might be able to finance smaller expenses like inventory and rent. A business credit card, on the other hand, has a higher credit limit and can be used for a lot more.
The one thing to remember is that you need to repay your debts on time. This is because using your credit cards like this runs the risk of ruining your credit score if you default. You might even leave your business with no financing options if this is your last option.
Although there are lots of ways to finance your business, some of these options may not be available due to the pandemic. Some of them may also have tougher terms and conditions. Therefore, ensure you do thorough research to find the financing options that are a good fit for your business and that carry the least risk.