Don’t let your business run out of cash – 3 alternative financing options for small businesses

June 1, 2020

Learn why you should consider alternative financing options for small businesses. 

 

- A survey revealed that cash flow management was SMEs’ number one struggle in 2018.

 

- Traditional bank loans are not the only way to get a business started. Today, there are alternative financing options for small businesses.

 

- Technologies are helping with cash flow problems by enabling businesses to use their commercial or personal credit cards for all payments, even if the recipient doesn’t accept them.

The financial difficulties faced by small businesses have been widely talked about recently. The Spring Singapore SME Financing Survey, for example, revealed that cash flow management was 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 financing options for small businesses, which are helping them gain access to funding more easily.

 

Three alternative financing options for small businesses

 

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 underutilised 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.

 

There are alternative financing options for small businesses which are easy, practical solutions to cash flow management. PHOTO: PIXABAY

 
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, enabling creditworthy businesses in need to match with legitimate investors.

 

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.

 

 PHOTO: PIXABAY

 

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 alternative financing options for small businesses are a drop in the ocean of innovation but they share in that they are easy, practical solutions to cash flow management.

 

Resources:

 

 

About the Author

 

Nicki Ramsay  |  CEO and Founder  |  CardUp

 

An expert in the payments industry, Nicki has built digital payment products and has previously held various leadership roles for American Express, across Asia Pacific and Europe. She is seen as a thought leader in the fintech space and is a regular speaker at industry events including Money20/20 and the Singapore Fintech Festival.

 

 

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