Small Business Resources

Small business financing – 4 ways to inject cash

2 min read

Small businesses are an expensive and onerous proposition. You will almost always have to produce a thick wad of working capital to play this game or continue playing and grow your business.

What are your possibilities and how do they measure up? Let’s look at a few small business financing options.

Self Financing

“Every time you borrow money, you’re robbing your future self”― Nathan W. Morris

I’m pretty sure you can figure this one out… You simply finance your own business from your own savings account and be without the entanglements of the ideas of outside investors.

You’ll have to manage without all of their investment money too.

Financing your small business yourself relies on extremely minimal borrowing (to the point of insignificance), but it comes with complete control over the business.

In a nutshell this comes down to control and a lean, savvy ethic. You’ll be forced into frugal, canny business decisions by playing with your own limited coin (not other people’s dollars) and your control over the business will be absolute.

Self-financing is often favoured because it’s a lean model with the founder in complete control. If you’re a control freak, self-motivated and have a cracking idea (on top of a healthy savings account) look no further, this one’s for you.

Investor financing

“When money realizes that it is in good hands, it wants to stay and multiply in those hands”― Idowu Koyenikan

This is where angel investors, venture capitalists and outside shareholders foot a lot of the bill for your start-up. You get more capital from investment funding, but the trade-off is that you’ll forfeit sole oversight, as your investors will want a say in the business. After all, it’s their money and they want to see a return on investment.

This really amounts to having a business idea which exceeds your current savings and/or experience level. If you have a grand idea, a fully formed business model and confidence it will be a booming business, attracting investors is a fantastic way to drive a project bigger than your boots.

An extra benefit is the wealth of knowledge and experience you will gain by partnering with investors. They will also be very motivated to see their investment bloom, so growth may come a lot easier.

Bank Loans

Of course, the most obvious option is bank financing. This is perhaps best at the beginning stages of your small business.

Small business financing through a bank loan has the added benefit of ‘detouring’ all other options. If you have a solid idea, a business plan in place, possibly some collateral for securing the loan, then you’re on your way to a fruitful conversation with a loan officer.

They have the advantages of:

  • Accessibility and convenient
  • No profit sharing
  • Complete control

However, be aware of:

  • Lengthy and onerous approval process
  • Exhaustive prerequisites
  • Losing your secured collateral

Cash flow Loans

Another great choice for small business financing. A typically short term, cash flow assisting loan that is unsecured and generally of an easy and immediate nature.

Your assets will not be at risk and your approval time will be dramatically faster than banks. It’s not designed to grow your business with as you might use a business loan for that.

Importantly, it is also not for unhealthy businesses desperately seeking to stay afloat.

It is for reasonably healthy businesses that are a victim of timing or temporary under funding.

What are some common circumstances you could find yourself in that would necessitate a cash flow loan?

  • Those who needs funds fast, but have guaranteed cash coming soon
  • Those buying bulk stock at discount prices
  • Meeting a rising business demand with new equipment (new coffee machines for a busy cafe or new lawnmowers for growing gardening business etc)
  • Temporary staff for a big event or busy period (event companies, special holidays and surge periods etc)
  • Market expansion – maybe you need financing for a new store in a high demand area or a new fleet of trucks for a booming interstate trucking company.

So, if you find yourself in any of the above scenarios, consider forgoing the big four banks and use the fit for purpose, snappy and hassle free cash flow loans available here.

by Alex Neighbour, March 23, 2020

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