5 signs your business needs outside funding.

Jul 19 2018 | By contributing writer Aaron Berson, manager and cloud accounting ecosystem curator, EisnerAmper

In the life of many businesses – especially new and growing ones – there comes a time when income from sales doesn’t cover all of the anticipated expenses.
Maybe you want to ramp up production, or invest in new equipment or technology. Or perhaps cash flow is tight before the holiday seasons kick in. At these times, tapping into outside funding can help. And don’t wait until the bills are piling up – look out for these 5 signs that you may need funding sooner.
1. You’ve reached production capacity. This is a good problem to have – that is, you’re selling as fast as you’re providing products or services. On the other hand, if inventory shortage or overbooking leads to unfulfilled orders and lost sales, this dream could quickly turn nightmarish. If you see this situation developing, it may be time to seek funding for more inventory, personnel, or other tools to raise production capacity.
2. You’re depleting personal assets. Try to maintain a virtual wall between your personal finances and your business accounts. Don’t siphon from your own savings to pay for your business. If you have investors, they don’t want you to literally lose your shirt to keep the business going. They want to see personal drive – not personal desperation.
One of the dangers of tapping into personal funds too deeply is low personal cash flow could push you to make impulsive business decisions. On the other hand, if your personal finances are relatively robust, you’ll be more likely to think long term about business health and whether your business is sustainable, even if you get outside funding to get you through the rough spots.
3. Rising costs of goods or production are eating into profits. First, figure out if this is happening to your competitors, as well. If it’s an industry-wide trend, you’ll have to decide if you should pass on increased costs to customers. Will they pay higher prices for your products and services? Or can you absorb a hit to your gross profits? Once you’ve decided how to deal with the increased costs, you might want to stockpile goods and materials as a hedge against future price increases.
4. You need expert help from accountants or attorneys but don’t have budget for their fees. Paying for expert advice is a business investment. Accountants can help you uncover tax credits that you might not know about; attorneys can save you thousands by making sure contracts are properly worded. And paying experts for advice can give you more time to spend on the business. Instead of waiting until the money is available, borrow money upfront for these services that can help protect you from future missteps.
5. You’re overworked and spending too much time on admin or operations. It makes sense that you’d want to keep a high-level view of all aspects of your business. But if you’re spending weekends doing the books, writing ads, and calling shippers, you may be stretching yourself too thin. Extra funding can allow you to hire bookkeepers, logistics companies, or payroll administrators.
If you decide to search for additional funding, be sure to explore alternative small business funding options. For instance, PayPal makes two lending options available to small businesses, with fast access to cash at a competitive price:
  • The PayPal Business Loan* offers loans between $5,000 and $500,000.  It’s a fixed term loan based on a picture of your business that you automatically repay with a predictable weekly payment. Check your eligibility.
  • PayPal Working Capital** offers loans between $1,000 and $125,000.  It’s based primarily on your PayPal sales history (no credit check), and you automatically repay it with a percentage of your PayPal sales. Minimum payment is required.
If you’re having trouble justifying outside funding for the costs listed above, balance them against the potentially huge value of having more time to do what you do best – whether it’s design, product research, or just brainstorming.  Help free up your time to work on the business instead of in the business!         
Aaron Berson is a Manager in EisnerAmper’s Private Business Services group. He serves a diverse client base from start-ups to mid-sized companies. His expertise includes financial statement preparation, tax preparation, and accounting system implementation and training as well as app ecosystem curation and education.

The contents of this site are provided for informational purposes only. Neither PayPal nor EisnerAmper LLP represent or warrant that the guidance given in this article is complete, or appropriate for any particular business purpose or use.  You should always obtain independent, professional accounting, financial, and legal advice before making any business decision.
* The lender for PayPal Business Loan is WebBank, Member FDIC. Applicants must satisfy certain requirements to be eligible.  Subject to lender approval, the PayPal Business Loan is offered between $5,000 and $500,000 and with durations from 13 to 52 weeks depending on loan amount.  See Terms and Conditions for details.
** The lender for PayPal Working Capital is WebBank, Member FDIC.  A PayPal Working Capital business loan is subject to credit approval, as determined by the lender, WebBank, Member FDIC. To apply for PayPal Working Capital, your business must have a PayPal business or premier account for at least 90 days and process between $15,000 (or for premier accounts $20,000) and $20 million within those 90 days or within any time period less than or equal to 12 months. PayPal sales include processing on PayPal Express Checkout, PayPal Payments Standard, PayPal Payments Pro, and PayPal Here.  See Terms and Conditions for details. 
PayPal, Inc. is Licensed as a Money Transmitter by the New York State Department of Financial Services.  PayPal, Inc., NMLS # 910457, License # FT3345, Massachusetts Foreign Transmittal License. PayPal, Inc., Transmit Money By Check, Draft or Money Order By The Department of Banking, Commonwealth of Pennsylvania. PayPal, Inc. Rhode Island Licensed Money Transferor. PAYPAL, INC., NMLS # 910457, LICENSE # 34967, IS LICENSED BY THE GEORGIA DEPARTMENT OF BANKING AND FINANCE.

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