No matter what kind of business you operate, having cash on hand is incredibly important. You need money for a range of different things from paying your staff, paying rents or mortgages to purchasing materials or running machinery. These costs of operation are required to keep your business going.
However, if you go through some kind of cash flow problem, it can be hard to stay afloat. This can cause a lot of issues, and could even potentially stop your business in its tracks. Thankfully, there are some options to get the money you need when you need it.
Without any further ado, let’s look over some alternative loan options you can opt for when your business is in a cash pinch.
One of the most important costs to make sure you always are able to pay is your payroll. If you cannot pay your employees, your business likely won’t be open for much longer. An option to ensure you can always make payroll is by utilizing payroll funding as a tool. It works by a company selling their invoices to a payroll funding company. They will provide you with a cash advance, so that you don’t need to wait for the invoice to be paid before you get your money.
While nearly every invoice can work for payroll funding, it is important to keep in mind the fees and rates that a funding company might charge. For example, according to data from PayrollFunding.com, the average discount rate for an invoice that is 0-15 days outstanding is 1.24%, compared to 3.41% when the invoice is 46-60 days outstanding. It is always a good idea to familiarize yourself with the costs of using a solution beforehand.
Using Inventory or Equipment as Collateral
If you need cash fast and don’t want to pay an arm and a leg for it, you can use inventory or equipment as collateral. If you secure a loan against an asset with some value, lenders will be willing to provide you with the capital you need to continue operating.
Not only that, but secured loans often come with cheaper rates, so you will likely save money in the process. All different types of items can be put up for collateral from vehicles, to machines, even to the products you sell or build. Of course, you need to be sure to pay off these loans on time and in full. If not, you could end up defaulting and the lender could end up seizing the asset that you put up as collateral and potentially sell it to recoup what they lent you. This could spell disaster if the asset is important to the overall operation of your business.
Consider a Merchant Cash Advance
Another option for getting cash in a pinch is by using a merchant cash advance. A merchant cash advance is when a lender will give you the money you need upfront, and get it back by taking a percentage of your daily sales. So instead of you borrowing money and paying it back, it is an advance on your earnings in the future.
These don’t have any set deadline, the lender will simply continue to take a percentage of your sales until they are paid back. Thus, you will never be stuck making a huge payment when your cash flow is low. While they can be expensive in some cases, these are often one of the quickest and easiest ways to get the funding you need.
In conclusion, the alternative loan options included in this article will be able to help your business when it’s in a cash pinch.