Small businesses account for 99.7% of all business in the US, and over 80% of those will eventually fail due budget shortfall. If you’re struggling with cashflow (or if your just planning for the possibility) here are a few ways that you can maintain cash flow going while you work on building your business.
Look into Small Business Loans
Most small business owners need outside loans or investments to in order to grown. Loans for small businesses are highly sought-after, but you’ll need to have stayed afloat for at least a year in order to qualify. For a bank loan, you’ll often need a minimum annual revenue of at least $50,000 and proof of your ability to repay. Failing that, entrepreneurs can always look into online lenders or microloans, but be aware that these will often have a higher APR.
Find an Invoice Factoring Broker
If you find yourself wondering, “How does invoice factoring work?” you’re not alone: most business owners aren’t familiar with the invoice factoring process. Approximately 60% of invoices from clients are paid late, and if you’re a small business owner, that can affect your ability to keep the lights on. Invoice factoring essentially allows you to sell your unpaid invoices to a broker, who pays you some of the debt up front and the rest after the client has paid. Invoice factoring services are fast alternatives to traditional bank loans. However, you’ll need to decide how to choose the right factoring broker, as they’ll be representing your business as they collect on late invoices.
Build Business Credit Wisely
Just like a personal credit score, a business credit score allows you to qualify for loans and lets potential investors judge your level of risk. If you anticipate a small cash shortfall but believe you’ll be able to cover it later, you can always use your business credit the same way you would your personal credit. As long as you are always paying your creditors in full and on-time, you can build a higher credit score.
Even if you work for yourself and don’t have a staff, you should still build a trusting relationship with lenders and invoice factoring brokers. Having someone who is able offer advice and answer all of your questions, (such as, “How does invoice factoring work?”) can help you build a stronger business.