- A Startup’s Guide to Alternative Finance - March 15, 2019
- How Much Budget Should You Allocate to Marketing Your Business? - April 19, 2018
- Artificial Intelligence and its Growing Impact on Startups - April 12, 2017
5 Useful Options if Your Startup is Running Out of Cash
New or fledgling businesses are often particularly susceptible to the pressures that cash flow constraints can impose and finding quick access to funding can sometimes be the difference between making progress and vanishing without trace as a startup operation.
With that in mind, here are five potentially very valuable sources of financing available to companies making early-stage efforts at business development.
1 – Crowdfunding and peer-to-peer finance
If you’ve never seriously considered using crowdfunding or peer-to-peer finance platforms as a startup before then now could be the right time to do so. The field is growing rapidly and the mechanisms involved are becoming increasingly reliable and easy to engage with. All of which means more and more startups are taking advantage of the chance to raise cash by having investors buy into their companies or provide loans on the basis of pre-agreed and mutually beneficial terms.
2 – Alternative overdrafts
Ideally a small company would be able to make use of a bank overdraft facility in moments when their cash flows are being squeezed but these services aren’t always available to startups these days. As a result, in response to demand from small businesses, new facilities that serve essentially the same purposes as traditional overdrafts are emerging. Interest rates on these standalone products can be relatively high but potentially good value nonetheless if used sparingly and only in times of real need.
3 – Short-term loans
Another alternative means of accessing cash if your startup is struggling to find funds is through what are broadly referred to simply as ‘short-term loans’. These loans are increasingly being made available by specialist providers of business-oriented short-term financing solutions. Here again, the interest rates on these loans can be high but the growing competition means that worthwhile deals are out there.
4 – Invoice factoring
For startups and small businesses more generally, waiting what might seem like forever for invoices to be paid in full can be a source of real frustration, particularly when financial flexibility is already very limited. In this instances the speed and simplicity of processes referred to as invoice factoring can have real appeal and make good business sense. The process essentially involves a company selling its invoices to a third-party in order to raise upfront cash.
5 – Cash flow loans
It would be difficult to overstate the importance of cash flow availability in the context of startup operating and so it makes sense that there are now loans being offered to small companies specifically to cover these crucial considerations. A demonstrable income is usually necessary to gain access to these facilities but they are increasingly helping small firms stay afloat when cash flows are really beginning to run dry.
Making smart choices
For startup companies, there is often so much to focus on and to contend with that prioritising appropriately can be extremely challenging. However, without keeping cash flows running, even the most promising new business will struggle to survive. So it’s crucial to keep your financial options open and to get expert advice where relevant in order to ensure that your startup maintains a workable financial balance at all times.