The COVID-19 pandemic hit businesses hard, and those that have managed to weather the storm still face an uphill battle as they try to make a post-lockdown comeback. For many, the only option is to seek external funding to cover staffing costs and return to business as usual – but it isn’t always easy to get approved for a traditional bank loan.
In this most difficult of financial environments, there are still plenty of places business owners can turn to for support. This guide covers five of the best funding options available and explains how any small business owner can access the funds they need to resume ordinary trading and even grow in the shadow of the pandemic.
1. Use Your Overdraft
Business overdrafts are a quick and efficient way to borrow money without needing to make continuous applications for credit. These facilities allow you to keep making payments up to a set limit after your bank balance hits zero, and can really help with managing cash flow outside of your peak season.
It is worth noting that while a business overdraft can provide a convenient source of funds, these facilities often come with relatively high rates of interest and you may also incur overdraft fees.
2. Take Out a Credit Card
Credit cards also make for a handy source of business funding – provided that you can get approved for one with a high enough limit in the first place.
In many cases, using a credit card won’t even cost you all that much provided you choose one with a low annual percentage rate (APR) and pay off everything you spend within any stated interest-free periods.
All in all, business and personal credit cards offer revolving finance that can boost your purchasing power in an instant.
3. Apply for a Short-term Loan
Short-term loans make it easy for businesses to access the cash they need, and to repay what they owe over an extended period of time. This kind of borrowing can really help with cash flow, and it may even be possible to manage other debts by consolidating them under a single business loan.
The challenge for many entrepreneurs is in getting approved by a commercial lender – especially if their small business is relatively new. Thankfully, it’s still possible for a company director or an entrepreneur to take out a quick and convenient personal loan to use for business purposes.
In most cases, you won’t even need to disclose the reasons why you require a loan, and personal lenders are unlikely to want to examine the fundamentals that underpin your business.
4. Try Crowdfunding
Crowdfunding may seem like an outlier in this list, but it really could generate significant amounts of money for your business. Generally, crowdfunding campaigns focus either on equity or rewards. In the case of the former, you’ll need to assign a portion of your firm’s future profits to funders, while rewards-based campaigns generally give out products to those who back the business financially.
If you do consider crowdfunding, you’ll need to carefully weigh up your options to decide which route is best for your business. Companies pursuing this route will also need to get ahead of other fund-seekers by turning out a stellar marketing campaign and effective showcasing their innovative products or services to the paying public.
5. Request a Cash Advance
If you use a merchant services provider to process your customer payments, you may be able to request a cash advance. This is a facility that grants you a lump sum of money upfront, to be paid off as customer transactions roll in.
It’s a great way to secure commercial funding, but it could create a cashflow vacuum in the future and so it’s vitally important to carefully plan how you’ll use the advance to improve profitability.
Bouncing Back from COVID-19
Regardless of your financial situation, the last year has been incredibly tough for small businesses and their owners. While the government continues to ease lockdown measures, it’s essential to create a roadmap back to financial buoyancy – and the funding options outlined in this article could provide you with a cash injection to kickstart your business.
Naturally, all of the options we’ve discussed come with their own advantages and disadvantages – but through proper planning and careful management of your finances, your business could come back stronger than ever.