Fast Working Capital Sources
Working capital is the is used to run the day to day activities of a business. The money for the daily operation can exceed what business owner has planned. Banks can delay processing the loans which are not guaranteed for approval. As a business owner, you have to look for other ways of getting the working capital from other sources.
The business owner can be caught with capital difficulties even with a firm with good returns. The business owner has to cash fast from unpaid invoices and inventories. A company will not be able to pay their bills, meet their payroll and buy stock needed for the business without enough working capital.
The fast working capital sources enable the business to operate normally and smoothly. You can use factors to get working capital for your company quickly. This is where the buyer of the invoice advances money to the company before the invoices have been reviewed. The factor collects the payment from your clients after lending your firm the working capital. The downside of factoring is the loss of a portion of your profits. Consider the cost of sacrifice you will make before using factors to get fast working capital. The customers might lose confidence in your firm if they learn that you are selling invoices to get working capital.
Through purchase order financing, the business can also get money for running its daily activities. Unlike factoring where money the product or service has already been given and the factor has a new payee, in purchase order financing, the money is provided based on an order that has been promised. The wholesalers and distributors with large orders mostly use this source of fast working capital when they do not have enough to meet their demand. The purchase order financier will wait for the goods to be delivered after they have given you the fast working capital. The fact that this source of capital can be expensive in the long run is a disadvantage.
Merchant cash advance is mostly used by business people to get fast working capital. The money you get from merchant cash advance is paid back when the business sells the credit cards. There is usually no set time for paying back the money, but mostly resolved within a year. The main disadvantage of merchant cash advance is the huge rates charged for the service. You should do your homework properly before sourcing your capital from any dealer.
There are sources of fast working capital on the internet. One of the internet source of fast working capital is the peer-to-peer lending which involves getting a loan from a lender on a specific website. The money you get from peer-to-peer lending accrues interest. The rates vary for different lenders and site.