How to Raise Working Capital After You Have Already Borrowed

How to Boost Small Business Cash Flow Even When You Already Have a Business Loan.

As a small business, there may come times when you need an infusion of working capital for both daily operations and to grow your company but find yourself hesitating and worried because your balance sheet already reflects at least one business loan that you are currently paying off. The current need for cash may not be an emergency just yet, but cash flow concerns are always pressing because your business has financial obligations to meet. These may be the same obligations that prompted you to seek funding earlier, but your situation since then may have changed drastically enough to warrant a new round of funding.

Most small businesses need some financial help at the beginning as start-ups, but the continual need to grow and sustain steady working capital doesn’t end in the first or even the first few years. Typically, smaller companies find they require occasional infusions of cash year after year as part of seasonal cycles or in response to negative economic trends, just like large conglomerates.

So, the question many small businesses ask is:

“How do I get more working capital for my business even though I already have a working capital loan or business line of credit in place?”

In some cases, the answer can be painful because getting an additional working capital loan from a bank carries potential consequences that can impact your operation for years if not executed carefully.

Why Get Small Business Loans in the First Place?

“It costs money to make money” is an adage that proves factual in the business world. Small businesses are the backbone of the economy, and to operate and keep the doors open, your company needs its lifeblood to stay alive. That lifeblood is working capital which you use for such things as:

Staffing. People are the heart of your company, and paying Employees on time at excellent wages, providing insurance, and funding other benefits is how you attract the right talent and keep them onboard.

Equipment. Whether a manufacturer or service provider, you probably have to use machinery and, possibly, vehicles for administration and production.

Supplies. Obtaining basic supplies and raw materials for the manufacturing process requires capital. The busier your company, the more supplies and materials are used, inventory turned over, and replacement supplies are purchased.

Facilities. From the factory floor and warehousing to office space and training areas, leasing (or purchasing) and insuring facilities to operate your business is costly. Even if your current

Whereas your initial working capital loan was necessary to start the wheels of commerce turning, debt is not a silver bullet. Debt just greases the wheels of commerce, while Sales transactions are the commercial engine of a business.

Using debt to fund your operations is an inferior strategy compared to the power of using your revenue from sales of goods and services.

So, the main reason for getting a small business loan is so that you no longer need a small business loan. Your company achieves this when its cash flow and working capital derive from profitable sales funded by the initial loan.

If a loan doesn’t contribute to sales and revenue growth, it is a liability ‘squared’ since it produces no profit while still requiring repayment. The bank can lend, but making a loan pay off for your company is your team’s responsibility.

Once your loan goes through, there are several reasons for not adding more debt and liabilities to your balance sheet. They are as legitimate as the motivations that prompted you to seek the funding that now serves as a potential obstacle to bringing in more working capital.

Banks love to lend when you don’t need their money because you have got plenty of your own. They trust that you know what to do with any capital you borrow. That is precisely the position a smart business wants to occupy.

Why Would You Need Multiple Working Capital Funding Sources Simultaneously?

Yes, you did a great job getting capitalized last time. The problem is that, despite getting that capital, you may still find your company needing a cash infusion for day-to-day or even upcoming seasonal ramp-ups, such as during the Christmas season. There are some obstacles and reasons to avoid digging your company into an even deeper fiscal hole, but they can also justify seeking more capital the intelligent way.

Too Many Debt Obligations

You may be restricted from seeking additional funding because your lender bases their decision on your balance sheet at the time of application. Depending on your lending institution, your loan officer may keep tabs on your business financial situation to make sure that you are able to repay the borrowed amount on time.

As with any household, your financial picture will decide if you can and should seek additional debt funding. Suppose you intend to seek out another loan. In that case, these are matters that a lender will scrutinize thoroughly, especially in a post-pandemic shaky global economy where banks are seeking to maximize returns and minimize risk.

Your Current Loan Costs are Too High

Traditional and Non-traditional working capital loan resources are in the business to make profits. Sometimes, they do this by taking advantage of desperate businesses needing working capital. Unsuspecting or desperate organizations end up locked into penalizing high-interest payment arrangements that eat so far into already narrow profit margins that you need to reach out for even more money to pay those higher costs and fund your business operations at the same time.

Most lenders will take a close look at what you owe, your track record of repayment, your cash flow, balance sheet, and overall working capital to decide. If you are already saddled with high interest and short terms, it makes no practical sense to put yourself in an even worse position. That said, keep reading, and we will tell you a way around the problem.

Invoice Factoring is one example of costs getting out of control. Invoice Factoring is an alternative to traditional business loans that small businesses have used for years. Despite its often questionable reputation and endless customer complaints, factoring is still popular for entrepreneurs looking to bypass standard lending institutions for more flexible options.

Unfortunately, many business owners and operators pick the wrong factoring company and find themselves trapped by hidden fees, interest penalties, and angry customer reactions once they discover that another company has placed itself between you and them in the transaction. For this reason, we never recommend using a typical invoice factoring company to set up an additional line of business funding because it is too risky in uncertain times and painful when things get tough.

You Have a Seasonal Need for Temporary Working Capital

Holidays and annual seasons are great opportunities to boost sales, revenue, and profits. For small businesses, however, that means getting prepared for upcoming high demand. Preparation for seasonal lifts in business can include hiring extra staff, buying equipment and supplies, and running longer work shifts. When the season is over, the need is over.

In a perfect scenario, your company generates enough revenue and working capital during the seasonal or holiday period to overcompensate for the added cost of going further into debt, hopefully leaving enough profit after repayment to have made the effort worthwhile. Such a windfall is not always the case, especially in the face of supply chain disruptions that have haunted the global business community since 2021.

The challenge with any of those issues is that every business component has to stay in positive motion no matter your cash flow picture or working capital situation. There is simply no way to start shutting down integral portions of the operation without harming others. Having too much debt, costly loans, or merely a temporary need for cash won’t stop your financial obligations from pressing in on you because people want to get paid, including employees, vendors, suppliers, and utilities.

Your Sales are Good, Even if the Economy Is Not, But Cash Flow Is Slow

Unlike small businesses that sell directly to the retail customer (B2C), small businesses like yourself who sell to other companies (B2B) and local, state, and government agencies (B2G) have no Mastercard or Visa banks standing by to pay the invoices you send to clients.

As a B2B or B2G, you end up serving as a free, uncompensated lender, gaining no interest payments for the trouble of providing goods and services to be billed and paid later. There is no way to escape it because the businesses you sell to are often in the same boat as yourself, doing the work but waiting on payment.

That waiting period can be anywhere from 30, 60, 90, or 120 days or longer. As a national average, you can expect to be paid on a 30-day invoice somewhere between 65 and 70 days after the transaction. It’s not that your client does not wish to pay you but that they, too, are waiting to get paid by another business before they can pay you. In this scenario, you have thousands, possibly tens of thousands of dollars worth of valuable invoices collecting dust as the actual material value of the money owed to you loses value due to inflation.

For example, a $10,000.00 invoice is worth less than ten thousand dollars if you have to wait for 60, 90 days, or longer to get your money. The devaluation of currency happens even more quickly when inflation and interest rates are as high as they are after coming out of the Covid-19 pandemic. Devaluation is the cost of waiting: bleeding profits while your company’s obligations stack up and eat into your working capital.

How Your Company Can Raise Working Capital Even Alongside Existing Funding Sources

As you can see, small business entrepreneurs must be careful when considering new sources of working capital to ride out a cash flow crunch.

The best outcome would be for you to find a working capital resource that works perfectly right alongside a bank loan, line of credit, or SBA loan. You want the kind of cash flow connection that does not interfere with operations but helps you pay off your previous debts faster while strengthening your business. You can achieve this fast and easily, thanks to readily available capital that is 100% your company’s own.

To accomplish this feat, there is one patent-pending small business financial resource designed specifically to work in combination with existing loans while lowering the costs and risks to your organization. It is called NowAccount Accelerated Invoice Payment.

The great thing about Accelerated Invoice Payments is that you do not have to put on a tie and beg the lender to divest them of their cash to be repaid later at interest. That means no nervousness, embarrassment, or judgment if you don’t measure up in their eyes. Your small business is the perfect candidate if you provide goods and services and issue invoices to business or government clients for later payment.

Benefits of Accelerated Invoice Payments Working Alongside Existing Loans

  • Qualifying for a NowAccount is an easy, simple four-step process.
  • Instead of waiting for 30, 60, or 90 days or more to get paid on goods and services you deliver, you get paid immediately, minus a small, one-time 3% merchant fee. It feels like you’re taking a credit card for the transaction, so the money is of ready use.
  • Your client doesn’t know because the process is invisible and private to their eyes while completely transparent to your own.
  • Your company maintains excellent client relationships and trust because you are no longer obligated to chase down Accounts Receivables to hassle customers to pay the money they owe.
  • You can select one client account to convert into immediate working capital or as many as you desire, and their invoices into cash flow that you can use to pay employees, lease business facilities, purchase or rent equipment, pay utilities, order more supplies, or pay off existing loans.
  • There is no ‘paying off’ your NowAccount because the money belongs to you. Every payment belongs to you because it is earned from goods and services you have already provided.
  • You can be one of the lucky small businesses that can negotiate for better leverage with your suppliers because you always have the working capital on hand to pay them earlier than expected. Through NowAccount, you can use your ‘early pay’ privilege as an incentive for better terms, discounts, and other benefits not provided to late payers.
  • You can start with as much as a million dollars in transactions and raise that level once you are comfortable. Or, you can just go with a single invoice to cover any immediate cash flow needs.
  • Adds no red to your balance sheet because a NowAccount Accelerated Invoice Payment is not a loan, not a debt, not an encumbrance, and not a liability
  • Accelerated Invoice Payments through NowAccount make getting a traditional small business loan or line of credit easier in the future, if desired, because your revenue is measurable and liquid and adds no burden to your financial picture.
  • Accounts Receivables headaches are a thing of the past. You do not have to play the mean bill collector anymore.
  • If your client defaults on the invoice, you are not obligated to bother them. NowAccount does all the heavy lifting, which lets you and your team focus on what you do best: BUSINESS!

If you are a small business entrepreneur or company representative in charge of Accounts Receivables, you now know the secret to strengthen both your working capital and cash flow pictures, even when you already have a small business loan, bank loan, or line of credit established. You know how to raise working capital without adding liabilities and risks to your company, and you can boost your cash flow without having to go to your bank. Indeed, the Accelerated Payment Solution by NowAccount lets you serve as your own funding resource by removing the long waits for your money. Yes, you can enjoy the feelings B2C companies enjoy when they provide goods and services – you can be paid immediately, like taking a credit card, and put an end to worrying, stress, and sleepless nights.