Small businesses usually work on moderately-sized projects with rapid turnarounds. However, if an opportunity for business expansion through undertaking a major project suddenly presents itself, business owners need to come up with a quick influx of working capital. Here are some methods of obtaining financing so that you can handle any amount of work that comes your way.
Ask for a Deposit
Requesting an upfront deposit serves two purposes. It gives you the working capital you need to see the project through, and it minimizes the risk of non-payment from new clients. Over time, as you develop a relationship with the client, you may choose to reduce or waive the deposit for future work.
Streamline Your Collection Process
Often the reason your company is strapped for cash is that you are working with slow-paying clients. Reduce your working capital cycle by streamlining your collection process. For instance, use appropriate software to track and expedite your invoicing procedures. Make it easier for clients to pay by offering a range of payment methods. Conduct credit checks before you allow potential customers to participate in deferred payment plans. Reward clients for paying early, and penalize them for late payments.
Apply for an SBA Loan
Loans from the U.S. Small Business Administration offer low-interest rates, as the loans are partially guaranteed by the government. However, to be approved your business must have a good credit rating and be operational for at least two years.
Use an Online Platform
The internet offers various direct lending possibilities for business expansion. For example, in crowdfunding, you present your project directly to investors on websites such as Indiegogo and Kickstarter. Peer-to-peer online lending involves an alternative direct link between borrowers and lenders by means of an online platform.
Use Your Unpaid Invoices
Invoice financing involves the selling of your unpaid invoices to a lender for immediate cash. Until your clients honor their invoices, you pay a low-interest fee on the invoice value. This is an extremely rapid method of obtaining funding once your application is approved.
For more advice on obtaining working capital for business expansion, look to Rotay Capital Finance.