Any business owner knows cash flow is essential to keeping the doors open and the lights on. But when you’re already carrying a heavy debt load, finding extra money to fund your business can seem impossible. The good news is that there are steps you can take to free up cash flow without taking on new debt.
Evaluate Your Business Expenses and See Where You Can Cut Back
One of the best places to start is by evaluating your current business expenses.
See where you can cut back without compromising the quality of your product or service. For example, if you’re leasing office space, could you downsize to a smaller space or sublet a portion of your current area? Or could you cut costs by reducing travel expenses or switching to a virtual office?
Every little bit you can save will help ease the burden of your business debts and give you the breathing room you need to keep your business afloat.
Renegotiate Your Debts to Get More Favorable Terms
Another way to ease the strain on your business cash flow is to renegotiate your debts.
You can contact your creditors and ask for more favorable terms, such as a lower interest rate or an extended payment plan. If you have good credit, you may be able to get a lower APR (annual percentage rate) by shopping around for a new loan from another lender. You can also try to negotiate a lump-sum payment to settle your debt for less than what you owe.
However, be aware that if you renegotiate your debt, it may show up as a negative mark on your credit report. Therefore, it’s essential to weigh the pros and cons before deciding whether or not to renegotiate your debts.
Use a Business Credit Card to Finance Short-term Expenses
You could also fund your business using a business credit card to cover short-term expenses. This can be a great option because it can help you free up cash flow and avoid taking on new debt.
Additionally, using a business credit card can help you build business credit. This helps in the future if you need to secure financing from banks or other lenders.
When using a business credit card, it’s essential to be aware of the interest rates and fees associated with the card. You should also make sure that you can make payments on time and in full each month. If you’re not careful, using a business credit card can cost you more money than it saves. However, if used wisely, it can be an excellent tool for managing your business finances.
Ask Family and Friends for Loans or Investment Capital
Another option for funding your small business is to ask family and friends for loans or investment capital. Make sure you have a solid business plan and understand the loan terms. You don’t want to put your relationships at risk by defaulting on the loan or being unable to repay it.
If you can, try to get a low-interest loan from a friend or family member willing to give you some leeway on repayment. And be sure to keep good records to show them how you’re using their money to grow your business.
With careful planning and management, raising money from family and friends can be a great way to fund your startup business.
Sell Assets That Are No Longer Needed or Use Them as Collateral for a Loan
Selling assets is a great way to generate cash flow without taking on new debt. If you have equipment or property that is no longer being used, consider selling it off to raise funds. You can also use assets as collateral for a loan. This can be a good option if you’re confident in your ability to repay the loan and want to keep the asset in your business.
An excellent option to consider is invoice factoring if you’re looking for short-term funding to cover your business cash flow without taking on more debt.
Invoice financing allows you to sell your unpaid invoices to a factoring company in exchange for immediate payment minus a factoring fee.
Using an invoice factoring company can be a helpful way to free up cash. By doing so, you can meet other business obligations, such as payroll or inventory costs. And because it’s not a loan, there’s no additional debt to manage.
However, it’s essential to factor in the fees when evaluating whether invoice factoring is right for your business. In some cases, the costs may outweigh the benefits.
To find the best factoring company for your small business, compare fees, terms, and conditions. You should also read online reviews to understand the company’s reputation.
Watch out for hidden fees, as some invoice factoring companies may charge additional fees for account setup, invoicing, or customer service.
There are many ways to fund your business cash flow while managing existing debts. The best option for your business will depend on your specific financial situation.
Be sure to carefully consider your options before making a decision. Work with a qualified financial advisor if you need help determining which course of action is best for your company.
Want more strategies for funding your small business? Read 8 Strategies For Funding Your Startup Business.