How to Raise Cash for a Business

It “takes money to make money,” but some of the conventional sources of cash have dried up for small-business owners. But that does not mean you should give up. If you lack the necessary funds to start a business or you need more money to expand your current operation, there are still several possible ways to raise the cash. For example:

1. SBA loans: You may be able to obtain a bank loan that is partially guaranteed by the Small Business Administration (SBA). For instance, the SBA can direct you to a bank or other financial institution in your area that participates in one of its special programs. The bank supplies the application for an SBA loan guarantee.

2. Accounts receivable: One of the most sensible ways to raise cash is to look within your own company. Specifically, you may be able to free up funds with better cash management. Start by trying to speed up payment from delinquent accounts. By establishing a written credit and collection policy with the help of your business advisers, you should be able to improve your cash flow.

3. Accounts payable: Similarly, you should take advantage of any opportunities you have to hold onto your money. For example, you do not always have to pay bills as soon as you receive them. In effect, this technique is a source of free financing.

4. Excess inventory: An additional way to lower your costs is to reduce your inventory whenever it is appropriate. You may be able to exchange products or services through a “barter club” or contribute excess inventory to a charity. Note: A C corporation may qualify for an enhanced deduction on certain inventory contributions.

5. Private investors: Although financing from private investors is not as prevalent as it was in the past, this still may be a viable alternative for your company. These investors are often known as “angels” because they can rescue your company from dire straits. However, private investors who have a large stake in the bottom line can erode your control, so be careful.

6. Financial allies: Instead of seeking assistance from strangers, you may want to turn to suppliers or vendors who have an indirect interest in your business. It is likely that they will understand the nature of your business and act in a reasonable fashion. Caution: Depending on the circumstances, this may put you in a vulnerable position.

7. Bank loans: Do not automatically assume that you will not qualify for a traditional bank loan. The key is to prepare a loan proposal in a straightforward and businesslike manner. Provide a written business plan, cash projections and other records for the bank officer’s review.

Last, but not least, rely on guidance from trusted business advisers. They can help steer you in the right direction.