3 Ways To Finance Your Business Without Credit Cards
If you’re in a cash crunch and need to find some financing for your company here are three ways you may have overlooked.
1. Vendor Financing
Stretching out trade payables from, say 30 days to 60 days, is a pretty shared method for companies to enhance their cash flow. Usually vendors are not very happy when this happens, and some already voice their disapproval in no uncertain terms. Most businesses are small businesses and stretching out payables only hurts everyone in the long run. Think about it: if you are depending on one of your customers to pay you within 30 days, and that customer doesn’t pay for 90 days, it can considerably affect your cash flow. If it’s one of your major customers, the impact can be quite serious. You don’t have the cash to pay your bills and so a ripple effect is caused on down the line.
This suggestion is different. If you’ve established a good relationship with your vendors, sometimes it’s possible to get them to agree to finance part of your company by extending their terms for a particularly large order for an extended length of time. If you’re a new company with little or no history, you could approach vendors showing them your business plan and documentation of orders you’ve already received. If the vendor is convinced that your company will be successful, and one of their better customers in the future, they may be willing to give you a break now.
Another different is to guarantee the vendor that they will be your exclusive supplier for an agreed to length of time in exchange for longer credit terms. Or you can offer to pay slightly higher than market price in exchange for longer credit terms. This method can be dangerous, because it sets the precedence of a higher price. When the longer terms are no longer necessary, it may be a challenge to decline the price you pay the vendor.
sometimes, it’s possible to convince a vendor to exchange a trade payable owed to them for a observe payable instead, or possibly an equity position in your company.
2. Customers That Prepay
If you have successfully demonstrated to your customers that you deliver your merchandise to them on time, as ordered, you may be able to persuade one or more of them to put a place on their future orders, perhaps as much as 50%. You can add an motive by decreasing your price a bit in exchange for the place. Or you can throw in a bonus: if they’ve ordered 100 items you give them 10 additional. New customers can also be asked for a place, especially if it’s a large or custom order.
3.Trade And trading
trading is probably one of the oldest forms of commerce. It is simply the exchange of goods or sets for other goods, instead of using cash as the medium. The trade can be directly between the two parties or the trade can go by a trading exchange.
The trading exchange usually works on a point system, one point for every dollar. The exchange has members who have agreed to trading their sets and products. Let’s say you need a new lap top, but the computer store doesn’t need your product/service. You earn points by bartering with those individuals and businesses who do need your product/service. You build up points by the exchange. When you have enough for the lap top, you ‘buy’ the lap top with your accumulated points. The exchange sometimes takes a small percentage of the points as a fee for their sets.
Don’t be limited in your thinking as to what can be bartered. Approach bartering as you would any other sale or buy. Deal with reputable companies. Don’t feel you have to discount your product. The trading buy is reflected on your income statement as an expense. The trading sale (what you trade) is reflected as revenue.
trading organizations can be found on the web, just put in trade and trading organization. Many cities have locally operated trading organizations. Contact your local chamber of commerce. The yellow pages give listings in addition.
Use these three methods of coming up with cash for your company.