Did you know only 25% of businesses survive more than 15 years? Businesses often fail due to lack of financing. While strategic planning helps, sometimes the unexpected occurs. For example, your business may gain rapid traction that outpaces your production or you may experience a temporary cash crunch. In these scenarios, limited funding or lending options can prevent you from taking off.
Entrepreneurship can be a bumpy road, but we’re committed to equipping business owners with solutions to help them fulfill their vision and grow. Alternative funding solutions, such as invoice factoring and asset-based lines of credit, are resources every owner should know about when building their business. Here are five times you may want to start thinking about alternative funding for your small business.
#1 Your Business is Experiencing Rapid Growth
Gaining more customers than you imagined is a business owner’s dream. However, meeting the growing demand may require increasing your production or hiring more employees, which could be a challenge without capital. With alternative funding, a business can maintain its momentum and boost output while still covering everyday operational expenses.
#2 Your Business is Experiencing a Lack of Cash Flow
There are many reasons you may need more cash flow. For example, some businesses gain most of their revenue seasonally. Others may have extended invoice terms, making them wait longer to receive customer payments. Still others may have simply hit a rough patch with a miscalculated investment or market change. Alternative funding solutions can help a business owner stay afloat, keep employees on the payroll, and fulfill vendor obligations during a temporary cash shortage.
#3 You Cannot Secure Traditional Financing
When securing a loan, most people think of turning to a bank. However, banks consider various historical financials for their approvals. If your payment or credit history isn’t pristine, it could prevent a bank from lending to you. When traditional paths to financing deny your business needs, alternative funding can help. Additionally, some of these non-dilutive solutions leverage your existing assets, such as your invoices, inventory, or equipment, so you don’t have to incur more debt.
#4 You Don’t Have an Established Credit History
As we’ve already mentioned, banks will generally look at your financial history when approving a loan. However, you may have yet to establish a sufficient credit history if you’re a new business. In many cases, this doesn’t stop business owners from leveraging their industry connections to serve more customers, which may eventually require additional capital. Alternative funding partners generally focus on your future, which allows businesses to continue to grow.
#5 You Want to Invest in Your Growth
When a timely investment opportunity arises, including technology, a well-positioned storefront, or a new contract, time is of the essence. Traditional financing generally takes longer to secure than alternative options. However, with invoice factoring, for example, the process is fairly streamlined and painless. You can begin monetizing your accounts receivable within days and pursue new opportunities without disrupting your regular operations.
When your business lacks capital, you have more options than slowing production, turning down new contracts, or relying on traditional lending. Instead, get the injection of funds you need with alternative funding. Learn more about these solutions and how they may help propel your business.