Okay. You’ve taken all the traditional routes to obtaining the capital you need to run your business ‘” you’ve applied for loans, you’ve maxed out your credit cards, your friends and family hide when they see you coming ‘” and you still need capital. What should you do next? Give up and start researching the differences between Chapter 7 and Chapter 11 bankruptcy?
No ‘” not even close. The fight to obtain capital for your business has just begun. If you’ve reached the end of the road with your conventional arsenal of financing tools, here are the best unconventional tools to get you the money that you need ‘” when you need it. Of course, just because these ways of raising money are a bit off the beaten track doesn’t mean that you can’t put them to work for you before you exhaust your more conventional approaches to raising capital ‘” in fact, you may just want to put them to work for you right now.
When it comes to financing your business, nothing is sweeter than getting your customers to pay you before you deliver the goods or services that they have agreed to purchase from you. If you’re particularly astute at negotiating deals with your customers, you may be able to do just that. And if you can then turn around and convince your vendors to wait 30 days or more before you have to pay them for the materials and inventory that you buy from them, you’ll end up really multiplying the positive impact on your cash.
Always ask your customers for a cash deposit of at least 10 percent of the total price before you start work. Whenever possible, try to get half or even complete payment in advance. If the work that you perform occurs over a relatively long period of time, then be sure to ask for progress payments ‘” every week, month, or quarter ‘” that will enable you to stay ahead of the financing game.
The longer you keep your money in your bank account, the better your cash position is. We suggest that you always pay your bills on time. In an ideal world, you would make your payments on the day that your bills come due ‘” not a day before or a day after.
Another approach exists, however, and it’s an approach that keeps cash in your hands for as long as possible, providing you with a ready source of cash when you need it most. “Extending your payables” may simply be a nicer way of saying, “Paying your bills late,” but sometimes paying your bills late can give you the extra shot of capital that you need to stave off financial disaster and keep your business afloat.
Be upfront with your vendors about your payment extension plan, and use this option only when you have no other choice. By paying your bills late, you’re breaking your agreement with your vendors and you’re putting your future business relationships with them in no small amount of jeopardy. Be candid about the reasons why you need to extend your payables, and then schedule frequent but modest payments as evidence of good faith.