Do you know about External Constraints to Business Growth?

Our previous article “Managing Cash Flow and Other Constraints in Younger Businesses” went over the internal issues with the growth of a business, but what are the external issues that start up businesses may endure. Our focus for this article concerns funding.

Banks have a harder time loaning to businesses two years or younger as they see new businesses in general as a risky investment. Startups are “unknowns” for lenders, and banks need comfort to know that they will be paid back for money borrowed.

Even though banks have a harder time lending to newer businesses, there are other ways to get the funding you need to grow your business. Rektio Accounting has a few alternatives for you to consider:

  • Cash advances on merchant accounts. Some businesses especially eCommerce-based businesses can use this as a tool to fund capital short falls. The downside is it can be on the expensive side.
  • Factoring or Selling your invoices. We have had clients who have factored their invoices as well as some that have factored Purchase Orders. Cheaper then cash advance and more flexible in terms of repayment.
  • Business line of credit. Some banks can look past the uncertainty around the newness or uncertainty of a startup and get a business line of credit based on the founder’s financial strength. A lot of times in the beginning these will be cross collateralized with personal assets of the founders.
  • Raising capital from investors. Some possibilities include angel investors, venture capitalists, crowd funding, government grants and loans, and of course bank loans.

Rektio Accounting is in the business of solving problems. We want you to have all the information needed for your business to grow. Complete the contact form below to get your business accounting questions answered today.


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