Don’t let your business run out of cash – three alternative financing options

The financial difficulties faced by small businesses have been widely talked about recently. Last year’s Spring Singapore SME Financing Survey, for example, revealed that cash flow management is SMEs’ number one struggle in 2018.

Without healthy cash flow, it is very difficult for a small business to survive, let alone grow. Couple this with today’s difficult operating environment and the financial struggles for small businesses are clear.

However, the rise of fintech has driven a surge in alternative funding options that are helping small businesses gain access to financing more easily.

1. Unlocking instant credit

When money is tight, often businesses simply need instant access to smaller amounts to see them through.

The problem arises when the biggest monthly payments such as rent and payroll rely on bank transfers, cheques or cash. Meanwhile, a significant pre-approved line of credit on a company’s credit card sits relatively underutilised.

Technologies like CardUp are helping with this problem by enabling businesses to use their commercial or personal credit cards for all payments including rent, supplier invoices, taxes and payroll – even if the recipient doesn’t accept them.

This enables businesses to:

  • Free up cash by tapping into under-utilised credit limits to pay for large, recurring business expenses
  • Extend their payables by up to 55 days

  • Get instant access to funds without cumbersome loan applications, collateral or onerous contract terms

  • Process all payments in one place, saving much time and energy

All of this significantly improves a business’s short term cash flow management.

It only takes two minutes to set up and schedule a big recurring payment, making CardUp a fast and easy option for businesses to gain access to immediate funds.

2. Peer-to-peer lending

Small businesses used to have to go to a bank for lending. Now those unprepared or unable to borrow from a financial institution can find willing investors and promising businesses who agree on a suitable interest rate online. This once niche alternative to borrowing from banks has turned into a huge industry in itself with institutional-sized lenders. With Singapore leading the way as a thriving FinTech hub, P2P lending will pick up even further this year, enabling creditworthy businesses in need to match with legitimate investors.

3. Online invoice financing

The problem of SMEs struggling with late invoices has skyrocketed from 14% in 2016 to 81% in 2017 in Singapore, according to DP Info’s SME Development survey, having dire consequences on cash flow.

Online invoice financing, or “factoring”, converts outstanding invoices due within 90 days into immediate cash for the small business. Tech start-ups across the globe allow SMEs to list their invoices on their platform and these platforms can be accessed by a much larger pool of investors, allowing SMEs to access funding faster.

With so much technological advancement, these three options are a drop in the ocean of innovation but they share in that they are easy, practical solutions to cashflow management.

This post first appeared on Entrepreneurs’ Digest.

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