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Cash Flow, Finance & Accounting

7 Unique Strategies to Help You Overcome a Shortage of Funds

What to Do When Short on Funds

Almost every small business ends up in this situation at one time or another, and getting there works like this:

  • Step One: Have strong early success with the business in general or expansion plan
  • Step Two: Get lots of orders
  • Step Three: Receive late or partial payments from those new customers
  • Step Four: Need money (which you don’t have) in order to fulfill those new orders
  • Step Five: Panic

It’s a tight spot, but not one you can’t squeeze your way out of. If you’re in that situation now, try one of the solutions below. If not, think about each solution and set up a plan today for how you’ll use the most attractive ones when you do find yourself in this predicament.

7 Ways to Come Back When You’re Short on Funds

Negotiate Terms with Your Vendors

Turns out you’re not the only business that delivers the goods before expecting full payment. Many vendors and suppliers will also take partial payment – or even promise of payment – and deliver everything you need to fulfill all of your commitments to your customers. If you’re very careful with timing, you can do this with labor by tracking carefully to a monthly or semimonthly pay period. Call your vendors and ask about terms (sometimes called “factoring”), either as a one-time emergency or just how you do things moving forward.

  • Pros: Often free of charge. Times payment for raw materials closer to when you receive money for your services.
  • Cons: Not everybody agrees to this. Can result in “surprise” bills later.

Borrow From Other Projects

In some cases, it’s not a matter of having no money to get in supplies. It’s a matter of having no money earmarked for that particular project. You don’t want to do this every month, but for a one-time push you can opt to spend less on marketing, or put your cleaning service on hold or reduce funding on any number of other projects to make the money happen in the clinch.

  • Pros: No interest payments because you didn’t use credit. Can help you identify fat you didn’t realize you needed to cut.
  • Cons: Can put a “hiccup” in other operations with unintended consequences. Blurs the lines of your budget.

Borrow From Yourself

Comingling funds isn’t the best idea in the history of small business, but it happens all the time. If you have the personal funds to cover the business shortfall, lend it to the company just long enough to get that profitable paycheck. You can even do it at interest, though that’s often robbing Peter to pay Paul.

  • Pros: No interest payments. Fastest and easiest way to get money. Can make taxes tricky.
  • Cons: Largely defeats the basic purpose of a small business – to put money in your personal bank account.

Borrow From a Bank

Old-school loans and lines of credit were invented for situations just like this. If you have a relationship with a local bank or credit union, you can set up access to cash so you can get in the materials and labor you need to fill your orders. If not, you can still set one up – but expect it to take longer, to cost more and for approval to be less likely.

  • Pros: The traditional approach, and in some ways safer.
  • Cons: Long timeline for most products. Difficult to qualify for, especially if your business is in a tight spot.

The Personal Ponzi Scheme

If your business takes partial up-front payments, get more orders coming in. Use the money from the new orders to cover the old orders, and the money from next month’s orders to cover those. Eventually, the PIF payments come in and you’re able to square accounts and create a cash reserve so you don’t have to do this anymore. In the short term, it can save the day.

  • Pros: Puts you in a business growth mindset even in the middle of a crisis. You don’t have to pay interest.
  • Cons: Fundamentally unsustainable. If it falls apart, you may have technically committed fraud.

Business Credit Cards

A small business credit card is probably the simplest and most familiar way for small businesses to access temporary funds. It works just like putting that vacation on your personal VISA, and almost every vendor in the world is equipped to take payment in plastic.

  • Pros: Very quick to do. You understand exactly how this works already.
  • Cons: Extremely expensive. Easy to overextend accidentally.

Alternative Funding Options

If you need money right now to make more money in the coming weeks or months, a small business loan or revolving line of credit from Kabbage may help. You take just what you need to make those purchases, and pay it back on the timeline that works best for your business.

  • Pros: Fast and flexible. Doesn’t pull resources from other important projects. Qualification is easier than with most other loans.
  • Cons: It costs more than borrowing from yourself (but less than a credit card).

Kabbage Team

Kabbage is here not only to provide access to the small business funding you need, but to also help you grow your business through free marketing tips, webinars, tools and more. Is there something you'd like us to cover or want to get your small business featured on our blog? Send us a note at