Ever since the Global Financial Crisis in 2008, banks have become more stringent about lending money. This has led to a credit crunch that negatively affects small business owners around the world. With traditional financing sources drying up, entrepreneurs are now seeking creative ways to finance their business.
1) Venture Capital. Seeking an investment from an angel investor or a VC is a popular option for entrepreneurs, but there are many downsides that are often overlooked. Giving up a sizeable percentage of ownership of your company is an undesirable option for many. Also, some VC firms look at upwards of 200 possible investments per month but will only close deals for as few as five per year. The odds of receiving this type of investment are not in the entrepreneur’s favour.
2) Crowdfunding. This is a new type of cash infusion being led by the likes of Kickstarter, Indiegogo, and new platforms popping up everyday. If you can make a compelling pitch about why your company should be funded, then thousands of individuals will give you small donations which can quickly add up. However, each website has different requirements about which type of companies can apply and there is no guarantee that your business will reach its funding goal.
3) Family and Friends. This can be a quick way to secure some cash for when starting up a business without needing to go through lengthy contract negotiations. However, it’s not a sustainable income plan and you risk causing irreparable harm to personal relationships if things turn sour.
4) Purchase Order Financing. The most common scaling problem faced by startups is the inability to accept a large new order, since they don’t have the cash to build and deliver the product. This option allows you to borrow money in order to pay your suppliers immediately without forcing you to use your own company’s cash reserves. Funding is based on the security of your purchase order and a credit analysis of your business and your customer purchasing the finished product.
5) Account Receivable Funding. This form of business financing liquidates the receivables that are currently on your books and then on a daily basis turns yesterday’s invoices into cash today. If a business is looking for working capital, this is one of the easiest and most cost effective ways of getting it quickly – all without hidden fees. The benefits of this option is you receive cash fast, there are no long term contracts or credit limits, you get to choose which invoices to receive funding and it is easily available for new businesses.
Global Leasing & Finance Group offers businesses both of the last options. This is our way of helping your business finance your business with key solutions to free up cash flow and manage your receivables.