Business owners still believe cash flow is a top concern. In fact, a recent study published by Capital One suggests that cash flow is a concern keeping small business owners up at night. While this might seem shocking since small businesses create more jobs and make up 99.7 percent of all the businesses in the U.S., these entrepreneurs still have a hard time gaining access to cash.
Traditional financial solutions such as credit cards and cash are no longer the best or most viable options to fund small businesses. Today, business owners must find alternative methods to power their growth, but this is always easier said than done. If you’re a small business owner struggling to find capital or increase your cash flow, the following solutions are some of the top ways to find the funding you need.
An alternative to venture capital and bank loans
Securing venture capital isn’t easy, but what’s even harder is receiving a bank loan, especially if you’re a small business owner. According to the U.S. Small Business Association (SBA), 80 percent of bank loan applications are rejected. To make matters worse, the SBA’s 2016 Mid-Year Economic Report found that 41 percent of the small businesses that lack access to capital are unable to grow, making it hard for business owners to survive in today’s increasingly competitive environment.
To resolve this issue, some business owners are looking to alternative methods such as revenue-based funding, which is offered by a Seattle-based company called Lighter Capital. Instead of small business owners struggling to receive a bank loan, Lighter Capital will provide money upfront in exchange for a percentage of future revenue. The payments are based on monthly cash flow, which allows business owners to only pay what they can afford.
In a time where small business owners are strapped for cash, being able to secure financing and make flexible payments has become a viable solution for growth. Business owners no longer have to fill out an application for a bank loan only to get rejected or recieve high interest rates that are not likely to decrease.
Using alternative currencies to fuel the power of trade
In the U.S., businesses operate at around 79 percent of their potential capacity, resulting in 20 percent of their goods or services going to waste. Due to this loss in cash flow, one of the most effective ways for business owners to increase their growth is to use their excess capacity as currency or lines of credit, without any cash investments or outlay involved. To do this, small business owners must monetize their excess capacity by relying on alternative currencies that treat products or services as a form of capital.
This allows businesses to improve efficiency, while also paying for goods and services that may have been difficult to obtain due to a lack of cash. For example, if restaurant owners notice they have 20 open seats every week, they can decide to sell that extra capacity using an alternative currency like BizX dollars. After monetizing the extra capacity, restaurant owners can then use the alternative currency they've gained to buy resources that will help the company grow.
Increasing cash flow through crowdfunding
Another solution continues to increase in importance as small business owners move away from traditional funding methods. Crowdfunding, a strategy used to not only increase cash flow but validate business ideas, has become a major solution for entrepreneurs and small business owners looking to grow and expand. In fact, since Regulation Crowdfunding began in 2016, $127 million have been raised on crowdfunding platforms that are registered with the SEC.
This means that more business owners are gaining access to the capital they need to grow. One of the most successful crowdfunding platforms helping small business owners achieve this is StartEngine. The company invites business owners to create a profile and build a campaign showcasing their idea – and personality – for potential investors and it works. StartEngine has seen around 150 successful financings since inception. Out of 1,000 businesses that have registered to raise money online, half of those organizations have selected StartEngine. The ability for entrepreneurs and small business owners to validate their ideas and recieve cash flow is a trending avenue.
The new horizon for small business growth
Whether small business owners use crowdfunding, alternative currencies or revenue-based funding, all options help fuel business growth and increase cash flow. These solutions aren’t going anywhere and alternative methods to funding and growth will keep popping up as small business owners stop looking to banks and credit card companies for help. As the U.S. economy and job market continue to depend on small businesses, more opportunities to increase cash flow will arise, resulting in business owners who can finally sleep comfortably at night.