The problem with financial setbacks and emergencies is that by nature they leave you with hardly any time to react. You might be too late in remedying a situation, and so, you must explore certain avenues to raise money quickly.
Especially if your startup has a particularly high cash burn rate, running out of cash is the last thing you want to do. If your company runs out of cash and can’t keep paying the bills, that’s when things implode.
This applies to individuals too. If you a freelancer, for example, it’s best to have as much cash saved up as possible to deal with hard times and dry spells.
Even if you don’t have any money problems right now, it wouldn’t hurt to know what to do in the event that you did. The following can help alleviate some money problems.
1. Clear all debts quickly.
Often, the primary reason for a personal financial emergency is an unpaid debt. If you default on a home loan, the property gets attached. Soon, you end up facing prosecution and the prospect of losing your home. The best way to protect yourself against a financial emergency is to repay debts as soon as possible. This helps you avoid a snowball effect of problems such as collections, damage to your credit and lawsuits.
2. Take a personal loan.
If you need money in a hurry, the quickest (but not always the best) option is to take a personal loan. Every person with a savings bank account has a pre-approved personal loan. It is generally best to just take what you need. One thing to keep in mind is that personal loans are generally unsecured debts with a high rate of interest. Take them only if you are certain you can repay them quickly. As a last resort, you could always ask family for a personal loan as well if you are so inclined.
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3. Mortgage your own property.
If you own residential or commercial property, you can mortgage it to raise funds in a hurry. The lending institution studies the property documents then conducts a valuation exercise and looks at your finances. The loan is then approved or denied and the money can be used for your personal or professional needs.
4. Invest in equities.
A low fee investment account through Vanguard or Wealth Front will give you access to your cash when a financial emergency arrives. When you let your accounts accumulate over a period of years, your initial investment can grow considerably. This money can be used in times of need.
5. Sell owned property.
If all else fails, you can liquidate your owned property at current market value. It is important to set the right price for the property and not undershoot or overshoot the market value. Quoting the right price will help generate interest in the property and help you sell it faster.