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The spread of the virus COVID-19 has caused great economic uncertainty across the globe. Businesses across all industries have been forced to temporarily shutter as people move indoors to self-quarantine and prevent the spread of the disease.
It's a tough time to be a business owner, especially a small business owner. It might be difficult over the next few months to make ends meet. If you are a business that needs emergency cash in the wake of all this trouble, it's important to know where to look and what to do.
Strapped for funds? Read on and we'll walk you through what to do if you need cash fast.
In This Post:
Short-Term Loans
Getting a new source of cash flow can help prevent a struggling business from nose-diving into bankruptcy. There are many different sources that resourceful business owners can look to when it comes to getting their cash flow back up and running.
One of the most popular is a short term loan. There are many lenders out there who might offer quick small business loans to enterprises that are struggling.
A short-term loan functions in much the same way that a traditional loan does, but with a streamlined approval process. The goal here is to get the cash you need in your business account as soon as possible.
There's no time to waste when the life of your business is on the line. These loans are built on that understanding, with some lenders even offer same-day approval to applicants who fit the proper profile.
With this shortened application process also comes a shorter window for repayment. This quick influx of cash can get your business back up and running, but it'll also require you to turn the money back around to the lender quite quickly.
Repayment terms will vary from lender to lender, but most short-term loans will need to be repaid somewhere between a month to a year and a half. They are certainly more appropriate for emergency situations as opposed to the need for a traditional loan.
Invoice Financing
Sometimes, you end up in dire need of cash because the clients you've done work for haven't yet paid their invoices. It is in this instance that you might need to find a way to get cash to cover you in the intermedium.
Invoice financing is a popular way to get over this hump. You simply show the unpaid invoices you currently have to a lender, and that lender will then front you the money that you are owed from your clients.
When your clients pay you back, you can return that money to the lender along with a small fee. This fee will differ from lender to lender, so it's important to call and inquire about the particular terms.
However, this can be a quick and efficient way to get some emergency cash fast if you're in a dire situation. If you can make a deal with fairly low fees, it doesn't even have to cost you all that much money.
The application process for invoice financing deals are often quite quick and simple as well.
Merchant Cash Advances
A lot of the sales you do as part of your business might be via credit card. If clients pay for things with their credit cards, you might not receive that cash right away. Unfortunately, if you are in an emergency situation, you might need it.
It is in this instance that you might want to look into a merchant cash advance. A lender loans you a lump sum of capital in return for a percentage of your daily credit sales. The fees on this kind of loan can be fairly high.
As such, this is a high-risk way to get cash flow going again. It can get the money you need for your business quickly, but the repayment terms can be quite brutal.
The last thing you want is to end up in a worse financial situation than the one you started in. As such, it's important to keep this method as one of your last resort options.
Consider Crowdfunding
If you've really found yourself in a tough spot, you might want to consider turning to your community of supporters and clients for help during this tough spot. These are, after all, the people who love your product or service and who likely don't want to see you go out of business.
Put your situation out there on one of the popular crowdfunding websites and get the word out to your customers and friends. Use social media, send e-mails, and put up flyers if you need to.
People can donate their spare change (or a lot more) to help you get the cash you need to make ends meet. In return, you can offer your donors rewards, like future discounts, free items, or gift cards.
If you do sell gift cards at your business, you could even consider asking customers to just buy gift cards to use themselves in the future. That can help get you enough cash to get over whatever current obstacle you face. It's a common tactic by businesses during tough economic times.
Friends and Family
No one wants to have to rely on their support system, but when times get tough there might be no other option for a struggling business.
The fact of the matter is no matter where you look for emergency cash, there will likely be a price tag involved. You'll need to pay something back in interest. Your loved ones might be the only ones willing to grant you a loan with no interest rate attached.
If you're in a dire situation, that might be your only option to get by.
It's best to keep this agreement somewhat formal, no matter how close and trusting the relationship might be. Draft up a quick contract that outlines the money you'll be borrowing and when you plan to have it repaid.
Showing your loved one that you take this loan seriously will help them feel better about aiding your business. Keeping this professional and on paper will prevent the loan from causing stress on your personal relationship.
Just make sure to pay the loan back on time!
It might be a huge hit on your pride to have to ask friends and family for help. But remember, everyone goes through rough times and your support system is there to help see you through these exact scenarios.
Business Credit Cards
If you're in a tight place and need some emergency cash, you may be able to open an additional business credit card. A credit card is as good as cash with most vendors and being granted an additional line of credit might be enough to get us through a difficult financial situation.
There's some elements of risk in opening a new credit card. It'll likely lower your business credit score, for one. A credit card obviously has a short repayment window as well, meaning you'll need to find a way to get the additional funds together sooner rather than later.
On the bright side, apply for a business credit card can be quick and easy. There are some card companies out there that might even offer an introductory APR of 0%, which can help you to keep costs low.
If you need to get a strong cash flow going fast, you could certainly do worse than opening a new business credit card.
Sell Off Certain Assets
If you're in a need for quick cash, take a look around at your business. Do you have assets that are not essential for your business processes? While it may not be enjoyable, you might want to consider selling that asset for quick cash.
If there's a piece of equipment that you don't normally use you should look into that asset's value. There's a potential it has a large cash value. If you trade it in for cash, you can use that money to attend to the more essential needs of your business.
If you rise over the financial obstacles you're facing, you can always buy back the asset later or get a new one. Desperate times call for desperate measures, after all.
Getting Emergency Cash for Your Business
No one wants to see themselves in the red, but the reality is that in the coming year many businesses well. If you need to get your hands on emergency cash for your business, the above methods might be worth considering.
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