Want to learn the secret to sustainable business growth?
The reality is that just 42% of small businesses have their financing needs met. This means that over half of all businesses have their financing needs going unmet, with no viable business financing options to turn to.
Why is this a problem?
The biggest issue is that the financing landscape is vastly different today than it was just 20 years ago, yet traditional financing methods have not evolved nearly as fast as the new ways of working.
The good news is that with some innovative financing strategies, you can overcome the barriers to funding that you are up against and supercharge your business growth.
What you’ll discover:
- Why Traditional Financing Falls Short
- 5x Innovative Business Financing Strategies That Work Today
- How To Choose The Right Financing Solution For Your Business
- Smart Ways To Maximize Your Funding Success
Why Traditional Financing Falls Short
Small business debt averages $195,000, and getting access to capital through traditional financing is harder than ever before. Lending standards are higher, and approval rates are lower.
Interest rates are higher than in years. Supply chains are still disrupted. Inflation is eating into margins faster than companies can adapt.
Traditional banks want mountains of paperwork, perfect credit scores, and up to 120 days to complete the approval process. When you need money right now, this simply won’t cut it.
This is where alternative, innovative business financing solutions step in. Businesses that want to apply for a small business loan are starting to look to non-traditional financing methods that are fast, flexible, and better matched to their business needs.
5x Innovative Business Financing Strategies That Work Today
If you are ready to stop looking at financing options that do not work in the modern economy and start exploring the options that are helping other companies achieve their goals, you have come to the right place. Here are the five strategies that real businesses are using to access funding right now.
Revenue-Based Financing: The Cash Flow Game Changer
Revenue-based financing has gone from a “nice to have” alternative financing option to the “go-to” strategy for many business owners for an excellent reason. Instead of having fixed monthly payments that can cripple your business cash flow when times are lean, revenue-based financing requires you to pay a small percentage of your revenue.
How does this work so well?
When you are selling well, you pay more. When your revenue dries up, your payments are automatically reduced. It is an in-built buffer that protects your cash flow during lean times.
A full 10% of small businesses were using revenue-based financing in 2022, up from just 8% in 2020. Approval is quicker than with traditional bank loans, and you don’t need to put up collateral or give away shares in your business.
Invoice Factoring: Turn Unpaid Invoices Into Immediate Cash
Got customers that take 30, 60 or 90 days to pay invoices? Invoice factoring allows you to sell those unpaid invoices to a factoring company for cash, usually within 24 hours.
Invoice factoring is an ideal option for businesses with regular customers but long payment terms. The more invoices you can sell to a factoring company, the more cash they can provide.
Equipment Financing: Invest In Growth Without Draining Cash
Equipment financing is another great business financing idea if you need new machinery, vehicles, or technology but do not want to dip into your working capital.
Since the equipment being purchased is used as collateral for the loan, this option will provide better rates and terms than an unsecured loan. Additionally, you may deduct the entire equipment cost in year one via Section 179.
Merchant Cash Advances: Fast Capital For Retailers
If your business regularly processes credit card payments, merchant cash advances represent one of the quickest ways to get capital.
In a merchant cash advance, you receive a lump sum of money that you then repay through a percentage of your daily credit card revenue.
The big advantage of this? Approvals can take as little as 24 hours, and your repayments are automatically scaled back when times are lean and increased when business is booming.
Crowdfunding and Peer-to-Peer Lending: Community-Powered Growth
Community funding is not to be forgotten either. Crowdfunding allows you to raise capital directly from your customers and your supporters.
Peer-to-peer lending is similar, but you are tapping into individual investors rather than the general public. Peer-to-peer lending often has more competitive rates than traditional banks.
How To Choose The Right Financing Solution For Your Business
Choosing the wrong business financing option can cost you thousands of dollars and create unnecessary stress for your business.
Factor in your cash flow patterns. If your business sees significant seasonal ups and downs, revenue-based financing or merchant cash advances that adjust with your sales volume are a good choice.
Assess your timeline needs. If you need money right now, alternative lenders and factoring companies will often deliver within 24-48 hours. Banks can take weeks or months.
Evaluate your collateral options. Equipment financing is great when you are buying something specific. Revenue-based financing is ideal when you want to avoid putting up collateral.
Match the solution to the purpose. Working capital needs have different solutions from equipment purchases, which have different options from growth funding.
Smart Ways To Maximize Your Funding Success
Boost your chances of landing financing by following some of these proven strategies:
Start building relationships now. Don’t wait until you desperately need money to get in touch with potential lenders. Start conversations when business is good.
Keep clean financial records. Lenders want to see neat, organized books with consistent revenue patterns and clear financials.
Don’t put all your eggs in one basket. Diversify your sources of financing so you are not reliant on a single company.
Consider the total cost. Beyond the headline interest rate or factor rate, also examine fees and repayment terms. The cheapest option up front may not always be the most cost-effective over the long term.
Putting It All Into Action
Sustainable business growth is about smart financing choices. If you diversify your sources of funding and align your solutions with your cash flow patterns, you can finance growth without putting your operations under unnecessary strain.
The key is to act before you need money. Build relationships with lenders and maintain good financial records before financing becomes an urgent need. When the time comes, you will know where to look and which solutions will be best.
Financing limitations should not hold your business back. The solutions and strategies are out there to help you overcome the challenges. You just need to know where to look.
Source: Baddie Hub
