A newly launched business might not be earning revenues from the day one itself but still needs to settle its operating expenses on a daily basis. It takes some time for a new venture to break-even and earn revenue. Till then and thereafter, it needs capital to finance its everyday business expenses related to property rent, employee salaries, marketing expenses, inventory, etc. The capital utilized to finance such daily operational costs is referred to as the working capital of the company. An entrepreneur should arrange the working capital only after having a clear understanding of all the funding options available in the market. This will help him/ her to select the funding option that works best for him/ her.
Loans can be arranged from personal resources like friends and family. Though this type of working capital loan is much easier to get, it has its share of drawbacks as well. First, they might be apprehensive about lending a larger sum of money. Then, one or more payment defaults can even put the relationship at risk. The availability of such loans entirely depends on the kind of rapport a person shares and the convincing ability he has to keep the relationship intact during hard times.
Venture capitalists and angel investors are also popular sources of funding. A good management team and a rapid future growth plan are the pre-requisites of obtaining a venture capital. Small companies that do not have plans to go public in the near future might find it hard to get such a loan. Such small companies can opt for a loan from angel investors, provided they have a strong management team and qualify the requirements specified by them.
Maintaining a good credit score opens a lot of funding avenues for a growing concern. Loans are available from trade creditors who lend money on the condition that the borrower purchases bulk goods from them. Applying for a loan at the bank is also a good option. Short-term loans from banks are available to finance the daily operating costs of a small business. Both trade creditors and the banks rely heavily on the business credit score before lending the amount.
A business cash advance is one of the most popular and sought after form of working capital funding. The borrowers neither have to bear the burden of fixed monthly repayments nor is it mandatory to maintain an overall good credit score. The repayments are made through the future credit card sales of the business. As the repayment is dependent on the volume of sales, the borrower does not have to bear the burden of repaying the money on a monthly basis. Acceptance of credit cards as a mode of payment is a prerequisite for a cash advance.
Obtaining capital to finance the working capital needs of a small business is not a difficult proposition. The market offers a lot of funding options to the budding entrepreneurs. However, the decisive factor is the ease of repayment, liability burden and flexibility. A business cash advance scores above the rest in all these parameters.
