One of the biggest issues that small business owners face is limited cash flow. They often do not have enough money to fund their business and as such, they fail to realize the ideas they had for starting a new business.
However, with proper planning and some creativity, you can secure financial aid for your business idea when your cash flow is limited.
In this article, you will learn about various methods of obtaining financial aid for your small business idea when you don’t have enough money in your bank account or petty cash box.
Try Hard Money Loan
A hard money loan is a type of asset-based financing that lenders make to fund short-term needs, such as bridge loans or funding the purchase of income-producing assets.
A hard money loan can be used for just about any sort of real estate-related purpose, with the exception typically being personal use.
Typically, you will need at least one and often two types of equity: 1) cash down payment and 2) sweat equity (the time and effort spent fixing up the property). For this reason, they are most frequently used for fixer-upper properties.
The primary advantage of getting a hard money loan is speed – it’s typically easier to get than other sources, such as traditional bank loans.
They’re also typically more expensive than traditional forms of financing. Interest rates on hard money loans will range from around 12% up to 25%.
Your Startup Can Get Financial Aid from Government
Every year, the government allocates a large amount of money to small business development and support.
You can tap into this fund by registering your new business with various government agencies that offer financial and marketing assistance for startups and small businesses.
The US federal and state governments allocate several billion dollars every year to help entrepreneurs realize their dream of starting a new business.
The United States Federal Government has established an office called the Office of Women’s Business Ownership (OWBO).
The OW was set up under Title II of the Women’s Business Ownership Act of 1988. The OWBO is a cabinet-level agency that provides grants, training programs, and business counseling services to encourage and assist women in starting and growing their own businesses.
The Minority Business Development Agency (MBDA) is another government organization that assists new entrepreneurs, especially those from minority groups.
The MBDA helps black, Hispanic, American Indian, and Asian entrepreneurs acquire the necessary capital for launching or expanding their businesses through its network of local offices across the U.S.
There are several other agencies such as Small Business Administration (SBA), Department of Commerce, Economic Development Authority (EDA), etc., that offer financial aid/grants to small business owners when they cannot afford to fund their startup plans themselves. So, register your business with these agencies to take advantage of their financial programs.
Get Financial Aid from Financial Institutions
When you can’t afford to finance your startup yourself, consider asking for financial aid/funding from the banks and other lending institutions. Most banks provide loans or lines of credit to small businesses.
You can also avail of bank loans if you already have a regular income source such as a government job or pension, social security benefits, etc., which you can use as collateral against the loan amount.
Banks offer various types of loan facilities including start-up loans, microloans, SBA loans, unsecured business loans, small business lines of credit, merchant cash advances, farm operating loans, and agriculture equipment financing.
Get Financial Aid from Friends and Family or Personal Savings
Friends and family members and personal savings may not be the best sources for financial aid in most cases.
However, friends and family can help you in many other ways, such as by introducing you to potential partners, business associates, customers, etc., so don’t hesitate to ask them for small amounts of financial assistance when you need it the most.
Don’t Forget About Crowdfunding
If your business idea is unique or different from others, crowdfunding might help you raise the funds needed for starting up your business without borrowing money from banks or lending institutions.
Moreover, crowdfunding helps you build a community of like-minded people who believe in your business idea and can help you in your journey of entrepreneurship, if and when the need arises.
Learn More About How Others Have Found Funding
You should do some research on finding an investor or start looking for alternative financing options yourself. There are many benefits of securing funding before launching your new business idea.
Your chances of success increase exponentially when you find funders who share common goals with you and believe in your idea just as much as you do. At least then, they would also feel personally motivated to see that the company succeeds.
Seek out past entrepreneurs’ experiences by reading through informative articles or blog posts, or speaking with business owners who have had similar challenges in the hope of learning from their mistakes and successes.
These can help you become a better entrepreneur because you will be able to gain invaluable insight into what worked and did not work for these people.
You could also attend entrepreneurial events where investors gather to find new companies they can finance.
Use Your Network to Connect With Funders
Making connections is extremely important when your cash flow is limited because it helps tremendously with finding financial support for your business idea.
Start by making a list of all the business contacts that you have been introduced to during previous ventures or jobs.
Put together a concise email that outlines all the relevant information about your new business idea. You could even include example sketches, product designs, or even an app demo if you have them.
Do not forget to mention how your contacts can help your company succeed in the future too. Sending this type of introductory email is crucial because it shows potential funders that you are proactive and willing to go the extra mile for them too. It also provides proof that you already have ties to important people who can make or break what you are trying to accomplish.
Do you have a great business idea but lack the funds to implement it? Don’t let insufficient cash flow stop your dreams from turning into reality.
Hopefully, this article provided you with a high-level insight into what you can do with your business when cash flow is low.
Select what you think is the best out of the financial aid options available for small business owners to get the money required for launching or expanding your new venture.