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Small Businesses: Ways to Raise Cash Outside of Bank Loans

Finance

The recession hasn’t been easy on businesses, but small companies may be finding things particularly tough. If you run a small to medium-sized enterprise (SME) or a start-up, you may well be searching for some simple ways to boost your company’s cash flow. Read on for a few ideas.

Bank loans

Traditionally the first port of call when you need some short-term cash, banks are, as a result of the recession, somewhat tighter on their lending than they used to be. For small businesses, this can often prove a barrier to getting the cash injections they need.

It’s worth remembering, though, that if you’re a start-up you might be able to get some extra cash from government-funded schemes, so look into that before you begin thinking about a bank loan. If you do decide to approach a bank, remember you will need to prepare cash flow forecasts and demonstrate that you will able to pay the money back.

Borrowing against your assets

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As stringent criteria need to be met to secure a bank loan, applications are not always successful. However, there are other ways to boost your company’s finances. For example, if you’re willing to use your personal assets (so fine watches, a classic car or a painting, to name a few possibilities) to secure a loan, this could help you in the short term.

Your first thought might be to look for pawnbroker services in the UK. Instead of using a traditional high-street pawnbroker, however, it’s worth searching for modern online lenders. Services like this are – depending on your chosen company – simple to use and discreet.

They work in a similar way to traditional pawnbroker services, in that, provided you repay the loan on time, you will be able to reclaim your assets. This is an advantage over selling, as it gives you the option to use those same possessions as a means of generating finance in the future if necessary.

Cutting down the cost of utilities

Getting hold of some extra cash doesn’t always have to be about bringing in a lump sum. Making cutbacks and subsequently making good use of the extra money this gives you is an equally valid way of boosting your business’s cash flow, so it pays to have a thorough look through your finances to find areas in which you can do this.

As the recession has bumped up the cost of utilities, it stands to reason that this is a good place to start – but this isn’t the only possibility. Here are a few ideas:

• Review how much you’re paying for all your utilities (water, electricity etc), and see whether there are cheaper tariffs available. This simple exercise could help you make significant savings that can be put to more effective use.
• While you’re doing that, carry out a similar check on all those little necessities you frequently order – things like notepads and pens for staff, business cards and such.
• Do the same again with any supplies used to make your products. Obviously, this isn’t always an area you’ll be able to make cutbacks in without also impacting on the value of what you produce, but there’s no harm in checking!

New marketing initiatives

Another thing to consider is investing money to make money – and by that, I don’t mean making your first forays on to the stock market. During a recession, the spending of consumers and fellow businesses generally tightens up, which means you’ll probably see a corresponding drop in sales.

To tackle this, you might want to work on some fresh marketing tactics to drum up new custom, or perhaps encourage existing customers to make repeat purchases. The key is to do your market research well beforehand and to remember that your spending needs to be moderated in light of your projected gains.

Comments on this Article: 3

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  1. While your article provides some good ideas for cost cutting and profit generation, many small businesses are in desperate need of outside financing. At best, banks are approving a mere 14% of applicants – down from 46% before the economic downturn. Many of them find it a waste of resources to even open small business loan applications. With that in mind, I think we need to start talking about alternative financing options for small business owners who might not be approved for a bank loan. From invoice financing to micro lenders, there are places that small businesses can get the cash they need. It’s time we started educating small businesses about their options.

  2. Trevis says:

    Love the article. These are some good options for SMB’s & startups alike.
    I have two points to add:
    1) Be very careful with your marketing dollar. In my first business I had a $300 per day SEM budget. I blew through the 1st day in under 6 hours & most of the clicks I paid for were competitors.
    2) For existing businesses, there is another option from many merchant services providers (credit card processors). We call it Sage Cash Advance Program, where we will advance up to several months average credit card sales. It’s not a bad way to relieve a short term cash crunch.

  3. Dhana says:

    I’d like to add that focus on ‘bringing’ or ‘retaining’ customers. That is best way to keep the business engine up and running ‘profitably’. Raising external financing, is still predominantly debt (as highlighted in this article). In this bad economy, with less access to capital, you got to revisit your Customer’s Experience, Lead Gen, Conversion rate – preferably in an automated tool, cut-down on your waste spend on Advertising. Look at your Brand Advocacy generated thru’ your Customers. It can grow your top line without seriously compromising your bottom line.

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