Many small business owners dread the idea of urgent working capital needs because they are not prepared to address those needs with an urgent business loan. Without knowing their funding options and without quick access to a short term business loan, these kinds of emergency expenses can cause significant harm to their business. Without steady cash flow and healthy working capital, insured by lines of credit and short term loans, small businesses are on unsteady financial footing and are at risk of going out of business thanks to an unexpected expense.
So how can you make sure your business is prepared to weather any working capital crises and achieve sustainable growth? The good news is that its easier for small businesses to get the loans they need than ever before. Let’s explore your best funding options, the advantages of lines of credit, and why it’s best to establish relationships with trusted online lenders before you need the emergency business loans.
Prepare Your Business with Lines of Credit
The very best thing you can do to prepare your business for working capital needs is to acquire a small business line of credit. Having a line of credit means that you won’t have to take out an urgent business loan or put expenses on a business credit card. It can function as insurance against working capital needs or cash flow problems by giving you ready access to funds whenever you need them. You can also think of taking out lines of credit as getting approval for a loan from the online lenders before the need for the loan comes up: after all, you only pay interest on the amount that you take out of the line of credit, not the amount available. So having a line of credit open doesn’t cost your business anything until you use it. And because you take them out when you are on better financial footing and they are often secured by some sort of collateral, lines of credit tend to have better rates and terms than short term business loans.
So, how do you get a line of credit? The most important thing in the application process is to prove that online lenders can trust you to pay them back. You may need to demonstrate your cash flow by reporting your annual revenue, prove working capital with statements from your bank account, and show a history of making your monthly payments on previous loans. If your business isn’t on very firm footing at the moment, a line of credit might not be an option for you. If that’s the case, there are plenty of short term loans you can use instead and you can still set yourself up to address future needs by establishing a relationship with an alternative lender you trust.
Get Better Funding Options by Establishing Relationships with Online Lenders
Developing a trusting relationship with online lenders makes them more likely to give you the short term business loan or urgent business loan you need because they know that you will repay the loan. If you have to look for alternative lenders, you are more likely to get rejected. Plus, when urgent working capital needs come up, you need fast business loans. You probably won’t have time to pitch your business to hear multiple lenders offers and choose the best partner for your business. So you can get more reliable funding options by choosing an online lender you trust before urgent working capital needs arise. And you certainly can’t afford to go from one lender to another getting rejected before you find an alternative lender who can meet your needs.
The benefits of establishing relationships with online lenders you trust, like Capital Collaboration, don’t end with an easier application process and faster funding. Repeat lenders offer more than just basic short term business loans. Because they’ve worked with you before, they know your business needs and can direct you to the kind of short term loans that are best for you. Not to mention, bringing online lenders repeat business and showing them that you can be trusted to repay the loans can result in much more favorable terms for your short term loans. That can put your business on better financial footing once the immediate working capital crisis is resolved.
Funding Options: Emergency Business Loans to Consider
Invoice Financing
Invoice financing that allows you to get paid for your goods or services before your clients fulfill your invoices. It can be an extremely useful tool to kick start your cash flow and give you the working capital you need to grow your business. But a specific kind of invoice financing, called spot invoice factoring, can be especially helpful in addressing urgent working capital needs. While the rates can be higher than for traditional invoice factoring, spot factoring allows you to sell off individual invoices to a third party to generate immediate revenue that can cover urgent working capital needs.
Merchant Cash Advance
Like invoice financing, merchant cash advance is a great way to access revenue faster to cover working capital needs. They are short term loans that are based on your expected credit card sales. Where in spot invoice factoring you sell your invoices to a third party, with merchant cash advance you are selling future credit card sales. As such, the lender will look at your current cash flow from credit card sales and provide you with a lump sum which you will pay back with a percentage of your credit card sales for a given period. Because it is based on future revenue, it can be an excellent option for credit card based businesses.
Business Line of Credit
We’ve already explored why it’s a good idea to have a business line of credit ready in case a working capital need comes up. But what if you already having working capital needs that you need to meet? You can still choose to open up a business line of credit instead of taking out an urgent business loan. So long as you have strong business credit, assets you can offer as collateral, or a strong relationship with a lender, there’s a good chance you can qualify for a line of credit even if you are having challenges with your working capital. These lines of credit will probably have better rates than the short term loans you could otherwise get and because you only have to pay for what you use you don’t have to worry about taking out more money than you need. And unlike emergency business loans, lines of credit will help prepare you for future expenses.
