I can’t get working capital because I can’t get a loan, and I can’t get a loan because I don’t have collateral! How many times have I heard that complaint? Too many! But it’s a more common complaint among business owners than you might think. The question of how to get working capital is often a problem of perspective.
Without adequate capital, your business cannot:
- Capitalize on your idea before the competition copies and runs with it
- Capture the moment in the market when your opening occurs
- Feel out that moment and get a proper understanding of the need
- Know when or how to move next, because you don’t have funding
- Expand operations for your business capacity
- Take on that next level of retailer/provider for your product or service
- Advertise to capture brand awareness
- Nurture leads for your business online via any digital channel
I’ve been working in the finance industry for over 40 years. You know what I discovered in that time span? Businesses fail not for lack of good ideas, but simply for lack of proper funding. That’s right. I said it: capital is more important than ideas. The proof is in how easily some seemingly goofy ideas go big.
Pet rocks? Funded. The Hula Hoop? Funded. “Sea Monkeys”? Very well funded. My point is that “dumb” stuff wins all the time because the funding was there to MAKE it happen when market conditions were right.
I know. I really do. Your idea is probably not dumb or frivolous like the examples I’ve just used (though they were great fun for a great many kids back in the day). In fact, I’m willing to bet that you are among the more conscientious and hardworking business owners in your industry and niche who feel that your product or service is an essential addition to your niche. Perhaps your product or service actually improves businesses, or even individual people’s lives. But are you well capitalized for growth?
Okay, so how does getting capital work?
Well, let’s start off with how it doesn’t work…
- It doesn’t factor in your genius as an entrepreneur, unlike crowdsourcing (which is great, if your idea is really sexy to the masses).
- It doesn’t have to do with who you know (unless you know a business who has agreed in writing to buy your product in bulk, just as soon as you figure out how to produce it).
- A bank doesn’t care if you’ve done it before if you don’t have collateral.
- A bank won’t care if your product is an innovation unless you have market research to prove there is a ready market for your widget.
- Your parents don’t matter (unless they’re underwriting your loan with their home or business or other assets).
- Bad credit will stop you (if you’ve got no collateral to bargain with).
- It won’t help to appeal to mercy (never try that, by the way…).
If you’ve come to this point of your original concern (how to get working capital) with the realization that you need expensive land or equipment or building space as collateral to qualify for a loan at most banks, then you may next ask:
How do I get working capital without collateral?
- Look at the equity you have as a business that is currently “inaccessible”.
- Your building, equipment, even your house, can be collateral…but should you?
- Think of how people pay you. How can that income be accessed…faster?
- Collateral may be there where you aren’t looking. Is your business busy?
- Invoices are a fast way to expand working capital, and guess what: they are collateral!
- The safest, easiest way to finance operations is by liquidating short-term equity – factoring invoices into a revolving credit or even cash.
Discover how to turn your unpaid invoices into working capital now.
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