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How to Raise Working Capital Quickly: A Guide for Small Business Owners

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In business, sometimes you need to raise cash fast.

Perhaps you have just received a big order from an important client but you don’t have enough money to fulfill it. You can’t afford to disappoint the client. Or payday is around the corner and your business doesn’t have enough money to pay its employees. You can’t afford to delay their wages.

Regardless of the situation, you have no time for self-pity. You have to raise the working capital you need to keep the business’ operations going.

What do you do?

Fortunately, there are a couple of solutions for you. Continue reading to learn more!

Get a Quick Loan

When your business is low on funds and you need money urgently, getting a quick loan will typically be the first thing that crosses your mind. And for good reason.

There are thousands of lenders looking to lend money to businesses in need – like yours.

However, getting approved for a loan isn’t guaranteed. There are steps you need to take, including identifying an ideal lender and determining the type of loan you need.

Let’s briefly describe some of the loans you can get:

Business Line of Credit

If your business has an active line of credit that’s not utilized, you’re in luck. You probably have a card that enables you to spend the money.

For instance, if you’ve got a credit limit worth $10,000 offered by your local bank, you can easily spend the money by swiping the card. So, if you need to buy more stock, you can use the card to pay your suppliers.

What if you need the money in cash? Some lines of credit allow you to withdraw the money, but you face high charges. Do not withdraw unless it’s your only option.

Working Capital Loan

Most business lenders offer working capital loans.

Unfortunately, these loans have requirements that most small businesses don’t meet. Your business must have a good credit score and a solid flow of income.

These loans can also take time to be approved. If you’ve got some time on your side and your business meets the requirements, go ahead and apply for the loan. But if you’ve got no time to wait, it’s best to try another option.

Asset-Based Loan

If your business has bad credit or the income isn’t good enough, you can still get a loan – an asset-based loan, to be precise.

As you can already tell, you need to own some valuable assets to secure this loan. If your business owns some real estate, for instance, you can use it as collateral to get the loan. You can also use vehicles, manufacturing equipment, or raw land as collateral.

You can get up to about 80 percent of the asset’s value. For instance, if you want to use a piece of real estate that’s currently worth $250,000, it’s possible to get an amount that’s close to $200,000.

Read this asset based lending guide to learn more about how these loans work.

Personal Loan?

It’s possible to use funds from a personal loan for business.

A personal loan can take the form of a traditional loan from your bank. As long as you’ve good credit and proof of income, your bank can lend you money.

Credit cards are another personal option, especially if the amount of money your business needs to raise isn’t a lot. You can make business purchases using the card or make a withdrawal if your credit card company allows.

That being said, practice financial prudence when using personal funds for business expenses. Keep accurate records that’ll enable you to refund yourself in the future.

Accounts Receivable Financing

Sometimes it’s not that your business is broke. There’s money, only that it’s yet to be paid.

Perhaps you supplied goods and services and your clients are yet to honor your invoices.

Should you call them up and ask for your money right away? This isn’t how to maintain positive client relations. Even when a client is very late on their payment, there are proper ways to ask them to pay up.

There’s good news, though! With your invoices, there are companies that offer accounts receivable financing, at a fee.

Approach Your Investors

If there are people who have invested in your business, nothing stops you from going back to them when you need money.

Some investors will lend you the money you need, just like a bank would do. Others will give you more capital in exchange for a bigger stake in your company.

Both options are ideal, but the second one means diluting your ownership of the business. Just ensure you aren’t giving away more than necessary.

Run a Discount Sale

Who doesn’t love a good discount?

If your business sells stuff, reducing your prices can be an ideal way to raise cash fast. This is especially effective if you’ve built an email list. Do a blast email and let your customers know that you’re reducing your prices or offering great discounts for a limited period of time.

Don’t be surprised if most of them jump in on the offer.

You Can Raise Working Capital in a Matter of Hours

In a perfect world, you wouldn’t be caught in a situation where you need to raise business money urgently. But this world is far from perfect. Emergencies will happen.

Don’t panic. Take a deep breath and explore your options. And having read this guide, you now know how to raise working capital real fast.

Keep reading our blog for more small business tips and insights.

Also published on Medium.

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