Starting a growing business is no easy task. Between finding the perfect place for your new company, staffing the right people, and getting approved for funding, it can feel like you have a mountain of difficulties facing you. You may need to seek small business loans, investments from interested parties, or simply use your own personal money for funding and tiptoe around your business’s margins until your profits have grown enough to be substantial. No matter your approach to funding, it is best to know the best strategies for working capital funding. Some interesting and important facts about small businesses and funding are listed below.
One: A business with less than 500 employees is considered a small business, and they account for 99.7% of all businesses in the United States. Interestingly, a study by U.S. Bank reports that 82% those businesses fail because of cash flow problems.
Wells Fargo estimates that the average amount of funding needed by a startup small business is at least $10,000. Loans to help funding business credit and with this startup cost can come in the form of business loans or personal loans; where a personal credit score can range from 300 up to 850, a business credit score is anything between 0 to 100.
One of the most popular strategies for working capital funding is invoice factoring, which is a type of accounts receivable financing that turns outstanding invoices due within three months into immediate cash for a small business. This form of a cash advance can become available to the business owner is as little as 12 hours. However, over half of these outstanding invoices end up being paid late. There are many accounts receivable financing companies that can help advise companies on the risks of overusing this route.
Data suggests that 40% of all small business entrepreneurs in the United States are women, and the number of newly opened women-owned businesses is growing at over double the rate of male-owned businesses.
Funding a small business does not have to be as intimidating of a task as it may seem; however, keep in mind that it is easy to fall down a slippery slope if you enter a form of advance financing unprepared.