All businesses have their ups and downs, and many make it through, but others do not. Half of all new businesses that are started each year survive five years or more and one-third survive 10 years or more.
There are many possibilities of what you can do when you need extra cash on hand. Read on to learn what you can do when business money is tight.
Approach Your Bank
Your bank will want to still have your business if you have been with them for a while and have made timely payments on loans. Give them an advance warning on any additional cash you think you will need if you can because they might extend your credit limit. If you believe you are going to be in a tight spot for a while, the bank is far more likely to start worrying about how they are going to recover the funds they loan you in the first place. You are unlikely to have much luck getting an extension on your credit, so it is time that you look for other sources.
Look into Asset-Based Financing
If you have already signed a loan agreement with your bank, make sure this does not violate their terms. Even if it does not be sure to keep your bank in the loop regarding where additional capital is coming from. You might find this works in your favor as your bank might see you as more credible if someone else is willing to lend you money.
It is worth considering asset-based financing if you are trying to get through a financial bump or simply ensure growth does not stagnate. If you are unsure about making timely repayments, then be aware that asset-based lenders often will not wait for you to miss more than two payments before seizing your assets.
A lease-back option might be worth considering if you own assets or real estate. This involves finding a leasing firm that is willing to buy your assets or real estate from you and then lease it back to you. If you miss any payments, the lease-back company will rightfully be able to take back the property or the assets as they now own them.
Ask Family and Friends
Be sure that you understand the risk and explain the risk well before you ask family and friends. You will need your personal relationship to provide emotional support if things do not work out. So be aware of that fact. Think carefully what you need and what they need to feel comfortable investing if you ask your friends and family.
Alternative Funding Options
Crowdfunding: this type of lending is reserved for startups or new projects. This type of funding is more popular than ever and can be successful.
Grants: try getting a grant before you take out a loan. You can always keep the money even if you do not meet your fundraising goal.
Alternative loans: look for short-term cash advances. Make sure to review the repayment options carefully before signing up for a loan.
Settlements: if you are going to settle with your creditors, it may be worth consulting with an attorney especially if you are thinking of setting with all of your creditors. You will only do this if you are a step away from bankruptcy. While it is a better option that bankruptcy it can limit future financing.
If you are only looking to settle with one creditor, not everyone will agree to settle. If you decide to go in for an individual settlement, remember this may affect your future credit lines.
Declaring bankruptcy: individual or general settlements are better options so consult with a lawyer first. If you do declare bankruptcy you will find it hard to get loans, new credit cards and good financing options in the future.
Cutting costs and laying off staff: before you lay off your staff, consider pay freezes or cutting your own salary. There are lots of things you can do before you decide to let go of your staff. Make them a last resort and discuss it with your employees first. They might prefer a well-paid work rather than scale back to a 4 day work week.