Raising money is a regular need for small businesses. With tight margins, sudden and even relatively small downturns can have a substantial negative impact on your company’s finances.
But sometimes, unfortunately, business just is not great. Try as you might, you may find yourself in the red, unable to tighten up your budget.
At these moments, raising additional money may become necessary. There are many ways to do this, both traditional and less common; read on for some alternative, but useful, ways to raise money for your business.
Crowdfunding
Crowdfunding involves soliciting investment in your business, generally through a wider pool of small donors, or a small pool of large donors. In both cases, crowdfunding can be an effective way to boost your business’ prospects.
In the former, a crowdfunded campaign can help to raise community awareness of your business, and draw on a reliable base of loyal support. It can allow patrons to have a genuine stake in your business, strengthening your bonds. In the latter case, substantial investment — for instance, from venture capital — can help to massively improve your balance sheets. Of course, you may have to contend with partial ownership in your business, which can be a non-starter for some business owners.
Asset-Based Loans
Asset-based loans are another financing option for your business. They are generally fairly quick to acquire, and lenient about use. They are essentially lent based on the value of a collateralized asset — property you own, inventory, equipment, or something else.
While a default on an asset-based loan can lead to a significant asset’s seizure, if you can reliably repay, it can be a useful way to raise some cash.
Lines of Credit
Finally, lines of credit are a great tool for business owners to have on hand. A line of credit functions like a business credit card, allowing you to draw funds (up to a given limit) when you need it. Lines of credit can be secured or unsecured, meaning backed by collateral or not.
In short, they can be very effective ways to cover short-term funding shortfalls. However, beware of high interest rates: spending too much from a credit line and failing to repay can be devastating for your business in the long term.
Running a small business can be a challenge, and money may often be tight. But the options above can allow you to weather the financial storms that arise.