Financing Options When Your Small Business Is Running Out of Money


As every entrepreneur already knows, setting up a business is hard work. There’s a long and strenuous process behind building a company from scratch. But if getting a business up and running is hard, maintaining and growing it is even harder. That’s where the difficulties really begin because it takes sustained and permanent effort to keep a business afloat, regardless of your industry.

One common misconception is that once your business is established and successful, money issues remain a thing of the past. It would be great not to worry about financial matters ever again, but reality is quite different. Even long after your business is established, financial problems can still rear their ugly head. You can run out of money at any point in your entrepreneurial journey. And when that happens, you have to find immediate solutions to get your business back on track. If that’s the scenario you’re dealing with right now, let’s take a look at some of the financing options that could save your small business. 

Use your savings

Assuming you were cautious enough to build a savings account when your business was thriving, now’s a good time to tap into your reserve and use the funds to overcome the rough patch you’re going through. Building a cash reserve is one of the simplest and most effective ways to keep financial problems at bay, so you should start putting money aside early on.

If you haven’t had the opportunity to build a cash reserve, the next best thing is to use your personal savings to lead your small business out of crisis. This can be a difficult decision to make, but if you’re confident that your business is going to survive and thrive with a little help, then using your personal savings might be worth it. However, you must have a plan in mind before you make this move. Also, selling important personal assets to finance your business might be a bit too risky, so it’s best to leave this option out of the picture.

Informal financing from friends and family

Unfortunately, due to lack of resources of foresight, not all businesses come prepared with a cash reserve. That means you might not have the necessary funds to give your business the cash injection it needs. But your friends or family might have enough money to support you and your project.

If your close ones have the money to invest in your business and they are willing to help you out, then you’ve found a viable solution. Be careful though because this type of funding has both pros and cons. You get the money you need without going through a long and tiring formal process, but this can backfire later if things don’t go as planned and put a strain on your relationship with the person who gave you the money. That’s why you should have a serious talk beforehand and make sure your friend/family member is aware of the implications of his choice.

Get a small loan

When neither you nor the people who are close to you have the money to finance your business, there are still plenty of financial institutions who can provide financial support. Depending on your business’ specific needs, there are different business loans you can apply for from a variety of loan providers.

These days, applying for a business loan is a fairly simple process that won’t take up too much of your time. However, you should do a thorough research when choosing a lender if you don’t want to have unpleasant surprises later on. Take the time to compare your options, read the terms and conditions carefully and pay great attention to the fine print before signing an agreement. 

Consider quick wins

Usually, quick fixes are not something anyone would recommend when dealing with a crisis, but it depends on the context. A lot of entrepreneurs focus all their efforts on securing a big loan, a major sale or an investment when they need a large amount of money to get their business out of the woods. That typically means waiting a lot of time and pinning all their hopes on a solution that may or may not work out.

But they completely ignore all the smaller measures they could be taking while they’re waiting for something big to happen and save the day. Instead of concentrating your attention in one direction, you can take small steps that can lead to financial stability such as raising rates, cutting costs or changing the payment schedule. In the long run, these measures can help you raise money to keep your business afloat.

Get help from angel investors

Some believe angel investors only focus their attention on startups or businesses that want to expand, but that’s not true. Angel investors are people with a high net worth who invest in both startups and established businesses that are having financial difficulties, as long as they see potential in their investment. 

So, finding an angel investor can provide the solution to all your business’ money problems. And the best part in partnering with an angel investor is their help doesn’t stop at giving you the funds you require. They usually also provide assistance and guidance, since they’re directly interested in getting your business back on track. 

Resort to invoice financing

It’s very common for entrepreneurs to face money problems due to slow invoice payments. That can leave your business short on money month after month and put a lot of pressure on your budget. Luckily, there’s a very effective solution for this type of problem – invoice financing. 

Invoice financing or factoring implies entering an agreement with a company that will provide you with the funds to cover your unpaid invoices. That means you’ll have quick access to money without having to wait for your customers to pay outstanding invoices. Invoice factoring can help you improve cash flow, so you’ll be able to manage your finances more efficiently.