5 Ways To Access Working Capital For Your Small Business

Establishing a prosperous small business is an entrepreneurial ideal every small business owner chases after. Cash flow is necessary to every company’s success, so it is hardly surprising that 82% of small businesses fade into oblivion due to cash flow problems. Therefore, it becomes prudent to find adequate working capital to help your business operate and expand. Please consider the following points if you want to learn more about getting working capital for your small business.

  1. Business credit cards

Many experts agree that credit cards are among the best and most reliable sources small business owners can depend on for short-term financing. Therefore, the answer to your urgent funding concerns could be right in your wallet after all. If you already own a business credit card, you don’t need to apply or wait for approval when taking loans. Besides, you can finance a purchase using your credit card or by taking a cash advance. However, note that business credit cards charge interest rates that average 14.22%, so this option can become very costly, particularly if you miss a payment or can’t afford the minimum.

  1. Invoice factoring

Invoice factoring involves selling your invoices to a factoring company that offers you a lump sum of up to 90% of your invoice’s value. Therefore, you can access ready cash for working capital immediately instead of waiting for 30, 60, or 90 days for your payment after selling goods and services. This way, you can cover any business expenses that arise while your clients are yet to pay you. Thankfully, there are many reputable invoice factoring companies you can partner with to access working capital for your enterprise.

  1. Crowdfunding

Fundera estimates that a whopping $17.2 billion is generated annually through crowdfunding in North America alone. Cash from crowdfunding is best used to expand a startup, so entrepreneurs in the initial stages of business expansion typically opt for crowdfunding. Therefore, you can consider crowdfunding to get working capital for your startup from many investors who will generally take a free product or service from your company as a reward. However, it is essential to note that your crowdfunding efforts will likely succeed if your startup has a great consumer product with a commercial appeal.

  1. SBA Loans

Funds from the Small Business Administration (SBA) are among the cheapest and best sources of working capital for enterprises, so keep this in mind. The SBA guarantees loans issued by banks to lower their risks, allowing these banks to offer favorable terms to borrowers. SBA loans have low-interest rates and can be spread out over ten years, so they are best for long-term business investments like hiring employees.

  1. Merchant Cash Advance Financing

Merchant cash advance (MCA) financing might be the best way to access working capital if your company makes many credit card sales. MCA involves taking a cash advance against your enterprise’s future credit card sales. Your lender takes a percentage of your daily credit card sales till the advance and accompanying fees are paid off.  You don’t need any collateral to access your MCA, but fees can add up quickly, so keep this in mind.