Smart Alternatives to Raising Capital - Part 1

Before you go down the path of seeking capital from outside your business or borrowing funds, identify any other ways of raising capital. If you need funds then sometimes it is not a loan that you need.

Identify areas in the business to make savings

There is a good chance that you can generate at least some of the capital you need by using business savings. If you can generate the cash internally, it is often a better option than increasing your debt or taking investors on board. Look at how much you have available in cash reserves or what contracts or payments are due.

Look at ways you can make savings and increase your cash flow, such as selling equipment you do not use very often (and leasing it when you do need it), cutting down on travel expenses, moving some staff from full-time to part-time roles, re-negotiating deals with suppliers for better credit terms and reducing your own salary.

It is also important to follow up on any late payers. Make sure you have robust systems in place for handling debt and collecting what you are owed. The more working capital you have on hand, the better the cushion for any bad situation.

You will be surprised at how much all these savings can add up, generating more cash in the business that can be used to reinvest in business growth.

Shorten cash cycles

Shortening your cash cycle will increase your cash reserves, keeping your business going, and providing a buffer in times of financial uncertainty. The longer your business goes without cash, the longer it takes you to pay your creditors, and the riskier your business becomes. Encourage your customers to pay using online and mobile payment options – the cash is then in your account immediately. If you have to invoice, do it immediately and incentivize your customers to pay early, such as offering discounts. You can also shorten your credit terms.

Focus your attention on sales

Increasing sales is one of the best ways to improve profitability and bring more cash into the business. There are a number of different ways you can improve your sales numbers, such as making sure you and your staff are all trained in how to cross-sell and up-sell, investigating new distribution channels like an online store, implementing a professional sales system so that you can track customer buying behavior and predict their needs, or even look into franchising your business if demand warrants it.

It is important to remember the 80/20 rule: 80% of your sales will come from 20% of your customers, so look into ways you can sell more to your existing customers while still trying to gain new customers through your marketing strategies.

It is always worth considering a price increase too. There are ways to increase your prices without losing sales, and it’s something that should be done now and again, even if it is just to keep up with inflation.