Spreadsheets, bookkeeping, cash flows, balance sheets, financial statements…it’s tough to manage your finances as a small business. You may be a passionate owner with a tremendous product or service, but maybe your financial situation isn’t where you’d like it to be. That’s totally normal. 

Did you know small business accounts for a mind-boggling 99.7% of all businesses in the U.S?

And of the 99.7%, nearly 84% of small business owners have indicated they’re optimistic about the future of their companies. Not to be a Debbie-downer, but 82% of businesses fail because of cash flow issues and 40% aren’t profitable. As a small business owner, one of the most important questions you should be asking is: how do I make sure that I do not run out of cash? 

Especially when planning for growth, cash planning often involves looking at external financing options. Traditionally SMBs have had options like credit cards, small business loans, and sometimes even grants. Various forms of crowdfunding have also entered the scene over the last decade (investment crowdfunding being the most recent). Each are different ways to “invest in yourself,” as a business to try and increase cash flow.

Credit Cards

These are usually the easiest dollars to access. But the glaring liabilities include credit limits, debt, potentially racking up interest…there’s quite a few. It’s a better option for low-cost endeavors. If said businesses are seeking to invest heavily in themselves (like renovating their building or expanding services) to increase their cash flow, it might be worth looking at other capital raise options first.

Small Business Loans

Small business loans are certainly a viable option to raise money. Businesses can qualify for loans anywhere between $5,000 to $5,000,000.

It’s also a relatively quick process (it might take a few months). But there are factors that should be taken into consideration. For example, you do have to qualify for these loans. Qualifications vary by lender, but you can expect to see something along the lines of:

  • A couple years in business
  • Good credit
  • Operating for profit
  • Owner equity to invest
  • Exhausted other financial options first
  • Personal guarantee

Once you qualify and are accepted, you can use the funds however you deem it necessary. Pick your lenders carefully.

Grants

SMB grants are funds given to a business by an organization for a specific purpose. The main thing here (as the business owner) is making sure you have aligned values, and this is often a competitive process.

Grants are available during the development phase of a company. What’s the downside? As mentioned, you have to use the money exactly as stipulated by the organization you’re getting it from. Also, you have to find a grant and go through the application process (similar to the SBA loan).

Investment crowdfunding

You, the business owner, have flexible options for your capital raise. Not only are there different types of offerings, but you can be in charge of the type of reward/returns you want to provide. The accredited or unaccredited investor can find regulation crowdfunding offerings that they truly care about through a funding portal.

Basically, issuers retain a lot more control and can do a capital raise up to a million dollars while investors benefit from impact investing opportunities. But you can have a much lower target offering amount too – it just depends on what you need.

We’re a bit biased towards regulation crowdfunding, as you might imagine. But there is a catch: you have to run a successful raise campaign. If successful, you will get the financing you need along with a new group of brand ambassadors (aka investors). And we will help you every step of the way.
At the end of the day, it’s really about what funding strategy best fits your company’s needs. To find out more about regulation crowdfunding, please send us a note at info@vicinitycapital.com and we’d be happy to walk you through the process and answer any questions you might have.