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As a home-based business owner or netpreneur there will undoubtedly be times when cash is a bit tight and you start thinking of borrowing money to keep afloat. This is why most business advisors state that when you start a business on your own, you should consider the fact that you may NOT be earning for the next six months (startup time) and as such your savings should be enough to cover your business costs and your personal expenses. Of course, this 6-month period is a bit on the extreme and many well-planned businesses start earning a week after they start their business.
On the other hand, there are times when a BIG project means only BIG profits at the end of the contract. For example, say you got a big contract to provide hand-painted t-shirts but that full payment will only be possible within 45 business days AFTER you deliver the goods. That would mean at least 2 months of no incoming cash. And yet you need to pay for operational costs and employee salaries. These are often the times when a business owner starts to think of getting a loan...
But before you start paying a visit to the bank or calling on private lenders, consider the following alternatives first to borrowing cash.
Borrowing Money - Should You or Shouldn't You?
Conduct a SALE. One sure way to attract more business sales is to offer a discount or promotion on products and services. Buy-1-take-1 is always a sure hit, and discounted items always attract buyers as it makes them feel they are getting more than what they are paying for.
Lumping or grouping products and services together are also great ways to attract consumers. For products, you can offer a cap for 50% off if the consumer also purchased a t-shirt (at full price of course). This technique is also effective for services. For instance, if you provide online article writing services, offer article submission to article directories at half your normal rates. The key here is to group items or services that supplement each other.
Liquidate assets. Sometimes, we do not realize how much money can be had from items we already have. Consider selling one of the vehicles used in your delivery business or selling that expensive high-end scanner. This may also entail selling excess inventory at a much lower price or even property currently sitting idle.
Attracting investors. If you believe that your business will succeed and can present a good and sound business plan as to how it will succeed, why not pitch your idea to investors. If you have a small business, investors can be family and friends. If you have a larger-scale business, then investors can be third parties such as 'angel investors'. Contact state organizations of community business centers and see if you can get in touch with these potential investors.
Share the burden and profits of business with a business partner. One way of dealing with the financial burdens of running a business is by getting a business partner. Of course, be prepare to share the profits as well if you go for this option. You do not need to fear though as getting partner does not necessarily mean giving up control of your business. You can have 'silent partners' or have partners with limited roles.
Always remember that borrowing money entails paying it back WITH INTEREST. As such, do explore the alternatives above before seeking out a loan.
Action Steps to Prevent Getting a Business Loan
1. Increase sales by conducting promos, bazaars or offering discounts.
2. Liquidate assets. Convert items you can do without for cash.
3. Attract investors to your business.
4. Look around for a business partner.
Important Points to Consider to Prevent Asking for a Business Loan
- Ensure that you have exhausted all possible efforts of getting more money before running off to a lender.
- Don't forget that getting a loan means paying it... with interest.
- Evaluate if you really can pay the loan
Page Title: Discover Other Ways for Borrowing Money Than Taking Out a Business Loan
Page Description: When borrowing money, you'll have to pay it back….with interest. Check out these business loan alternatives when you decide you need some extra cash.
Date of Publication : 2006
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