Exploring 5 External Sources of Business Finance to Boost Your Cash Flow
Attracting external sources for business finance can go a long way in improving the overall cash flow of a company. Especially since business owners may struggle in times of financial distress when unexpected expenses arise or an opportunity for growth presents itself. Understanding the sources of finance readily available can be the difference between staying afloat and reaching new heights.
Bank Loans
One of the most common sources of business finance is bank loans. Bank loans often come with favorable interest rates, making it a favorable borrowing option for small businesses. An established business with a good credit score and a reliable source of revenue can comfortably avail themselves of this source.
Equity Financing
Equity financing refers to the sale of an ownership stake in the business to outside investors. These investors can be individuals or organizations that are willing to risk a small amount of their own money on the business. The investors hope that the investment will be profitable in the long run by selling the investment for a higher price than they paid.
Invoice Factoring
Invoice factoring is a timely way to obtain quick cash, especially for businesses that work with large invoice amounts. With invoice factoring, businesses sell unsettled invoices to a third party in exchange for a quick injection of cash. The third party, or factoring company, would then assume responsibility for following up with the customers about the invoice, while the business focuses on the day-to-day operations.
Crowdfunding
Crowdfunding relies on the financial support of the community or investors. It is a relatively new source of financing in the business world that’s gaining traction. It involves using an online platform like Kickstarter, Indiegogo, or Gofundme to collect small contributions from a relatively large number of people.
Angel Investors
Angel investors are individuals or groups who place their funds in startups or small businesses with high potential for growth. Business owners can get in touch with angel investors through networking events or contacting angel investor groups in the area.
Conclusion
Exploring these five external sources of business finance can provide struggling businesses with a helping hand when finances are tight. Bank loans, equity financing, invoice factoring, crowdfunding, and angel investors all have the potential to improve cash flow and take your business to the next level. Business owners should weigh their options carefully to decide which source of finance is the most appropriate for them.
