It is a fact of life that you need money to survive. This is not only true for individuals but for small businesses as well. If a business is lacking a sufficient amount of working capital to pay for its ongoing expenses, it simply will not be able to survive.
Working capital encompasses your current assets but does not include your current liabilities. It must be positive in order for your business to be successful. Working capital that is negative can adversely affect your small business. It is also something that nearly all small businesses have in common, regardless of industry or sector.
It occurs when there are situations like a slow season, a downturn in the economy, delays in customer payments and other situations in which you may find yourself unable to pay off your most pressing bills. A lack of working capital is always a bad thing, even if you are positive you will receive a huge amount of cash within a few months. In general, the single biggest reason why small businesses fail is that they are lacking in working capital.
If you are in a situation where you need to improve your working capital, time is of the essence. A wise thing to do is contact your creditors and negotiate with them. You should also get in touch with your customers and request that they pay you on time. However, these measures may not be sufficient in helping your small business to survive. The next step is to expand your company’s capital by getting financing.
There are many options available to you, but you must explore those options thoroughly to determine the best one for your particular situation.
What Do You Do First?
Prior to making any concrete decisions on financing, you must determine exactly how much money your business needs and how much you would be able to pay back. Take a look at your finances and come up with a shortfall amount between the monthly bills you need to pay versus your current available cash. It’s also wise to be realistic about the potential growth of your small business and whether you will have sufficient time in the future to pay off your monthly bills and other expenses.
How To Choose Options For Financing
There are a number of options available to you when you need financing to expand your small business. Of course, the most common are alternative finance companies and banks.
Alternative finance companies have greatly increased in popularity over the last few years due to the difficulty of getting financing from banks. The terms they offer are generally more flexible and they are more willing to accept applicants who have less-than-perfect credit scores. They also frequently work with a diverse range of small businesses for financing options like merchant cash advances.
Banks, on the other hand, require that the borrower have good to excellent credit scores and at least three years of documentation. Banks are also reluctant to work with companies they deem too great a risk. For these reasons, for many small business owners, an alternative finance company may be the better option.
EIN Cap, for example, helps business receive the financing they need by creating customized terms for their specific needs. We offer small businesses merchant cash advances that work around the business’ future credit card sales – but at a discount. This is a much better alternative to paying hefty loan fees every month, especially when business is slow.
Overall, it’s wise to also be diligent in finding a finance company that has an excellent reputation and rating from the Better Business Bureau. That way, you know you are getting your financing from a legitimate, reputable company and don’t have to worry about a scam. Reach out to our team at EIN Cap today to learn more about our services!