5 Useful Finance Solutions Banks Can Offer to Startups

Is your startup struggling with cash flow?

Lack of funds is one of the main reasons why startups never take off or fold along the way. According to a research published on The Atlas, running out of cash is the second top reason startups fail.

Startups, though, should ideally never lack for funds as such a state is guaranteed to hinder their growth and success. The best investment banks have a variety of financial solutions designed to help startups during their launch and support their growth.

Funding Options for Startups

Here are five of the most beneficial funding solutions banks can offer struggling startups:

1.     Business Loans

Aside from personal loans, many banks offer loans targeted specifically at starting and small businesses. New ventures can use these loans to purchase supplies, required equipment and even to find a good facility where they can set up shop.

One advantage of getting a loan is that there is a fixed amount you will pay per month. As such, you know how much you will pay the bank monthly This will allow you to manage your cash flow in line with your plans.

Generally, banks offer payment terms that range from one to 10 years. You can choose how long you want to pay for the loan based on your capability and preference.

Some banks also offer these small business loans backed by a government guarantee. This is often granted to startups that lack collateral.

2.     Business Credit and Charge Cards 

A business credit card can provide startups flexible and convenient short-term funding for their business needs. You can use it to buy additional supplies, pay for utility bills, make emergency purchases, and so on.

Most business credit cards come with additional benefits such as reward points which can be used as cash to pay for purchases. They can also come with travel insurance or air miles which can really be useful if you or other executives travel a lot.

A charge card can also give startups the additional funds it needs. It shares similarities with a credit card but it functions in a different way. 

Charge cards extend credit to you from the issuer. However, you have to pay the full balance at the end of the month. Leading banks offer this type of card; a lot of big, popular store chains issue them as well so customers can use them in their retail shops.

3.     Asset Financing 

This funding option allows you to borrow money or get a loan by using your asset as collateral. For startups, these can include current inventory, machinery, buildings or properties under the company name.

This financing solution is often useful for startups in need of a short-term cash loan or working capital. It is often used to purchase a vehicle or equipment the business needs or to buy supplies needed to manufacture products.

4.     Business Overdrafts

Another option that works as a short-term funding solution is a business overdraft. This option gives businesses access to a line of credit that extends beyond the available credit funds. As such, you are covered for emergency expenses and other short-term cash flow problems.

With this financing solution, you only use what you need up to the agreed limit. You, therefore, will always have peace of mind in terms of your cash flow.

 Business overdrafts have no fixed terms. As such, you can use up to your credit limit whenever you need to. However, you have to be aware of all the applicable interests and fees. You also have to know that these rates will differ depending on your usage.

5.     Invoice Financing

Invoice financing helps startups improve their cash flow and pay employees and suppliers. This solution allows businesses to settle some of their expenses earlier than they could if they had to wait until their customers paid them.

This is because with invoice financing, you can borrow money against the amounts due from your customers. You will pay a percentage of the invoice amount to the bank as a fee for borrowing the money.

This financing option can solve problems associated with customers taking a long time to pay and other difficulties obtaining another type of funding solution.

By choosing the funding product and the best bank to work with, your startup can avoid financial difficulties and stay on the right track towards growth and success.

 

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