The corona virus took the world by complete surprise. The virus infected tens of millions of people across the globe and millions died too.
The focus of most companies is to protect their employees, understand what risks their businesses have, and try their best to arrest supply chain disruptions to the best possible extent.
Businesses such as in the hospitality sector, tourism, air travel and entertainment have been badly affected.
Given the importance of working capital funding in these difficult times, businesses must immediately develop a strategy for cash management as a necessary component of addressing business risk.
You must ensure financing remains workable. Do not come to a conclusion that the financing alternatives available to you previously will continue to be available. Use this opportunity to actively look for alternative business funding.
There are ways to solve working capital problems in your business. Here are a few tips.
1.You can provide business services virtually
It is true that many small businesses rely on foot traffic and in-person sales or interactions. But now that is past. If you are in the fitness sector you can use platforms like Zoom to live-stream your fitness classes.
If your domain is non-emergency medical practice or veterinary care, you can make use of telehealth services.
- Stay in touch with your clients via phone, email or social media.
If you have a list of your customer addresses, now is the right time to use them. If your business is temporarily closed try to promote gift cards by emailing them to your contacts. Let the cards be without any expiry dates. This to some extent can solve your cash needs.
- Look for alternative lending options.
Even if you are doing your best by offering virtual services, you may still find it difficult to keep your working capital robust. You may still need extra financial help.
The CARES Act recently passed has provisions to assist small businesses impacted by the Covid-19 pandemic.
A merchant cash advance is one approach to obtain small US business funding in a straightforward manner if you meet certain criteria.
You can obtain financing by way of lump sum payment that can be repaid with future receivables.
The key features of Merchant Cash Advance SBA are:
- Lump sum payment
- Quick dispersal
- No or low interest rate.
Upfront, a merchant cash advance may appear tempting. Frankly, this type of alternative funding does provide a quick solution for those who are badly in need of short-term financial assistance, but have been denied loans by traditional sources like banks.
How to get it?
You must first sign with a merchant cash advance company. The usual process is, they will provide loan to your business in exchange for the daily credit card income.
But before you sign-in to the merchant cash advance company, weigh-in the following pros and cons.
- Cost of money – Factor-in the total cost of money given to you by the company. You need to pay back all the money plus the costs.
- Look for holdback percentage – If it is high, the business funding provider will pull more out of your credit card totals.
- Additional fees – Read the fine print carefully. You may be responsible for advance fees that can be quite substantial.
Mind you, small business funding has an easy application process and is easier to qualify and the turnaround is fast. But assess the drawbacks as well before you jump in.