Alternative Sources of Startup Cash
There are some other methods you can also use to come up with funds to help you in your fledgling startup.
Here are a few:
Supplier Financing – This is where you negotiate for longer payment terms for the items you purchase and use in your business.
Most suppliers offer discounts for paying invoices early: What we're talking about is the opposite. Extending terms to 60, 90 or even 120 days, with you of course paying a premium for the privilege, is a way of freeing up capital that you can use for other purposes.
Rent Your Equipment Instead Of Buying It – Many equipment suppliers will be more than happy to negotiate long-term leases for you.
This frees up working cash, requires no money down, and still allows you the opportunity to purchase the equipment if you desire. It's also a fully deductible item, as opposed to having to depreciate an asset.
Advances From Customers – This one is rather dependent on the type of business you are in, as it does not apply to some.
In many businesses it is customary to receive an advance for services rendered, or products delivered.
This has several advantages, from you being able to employ the cash to good use, to lessening the risk of non-payment on the other end.
Factoring – You can use your accounts receivable to generate cash. A third party factoring company buys your accounts receivable and advances you most of the money while it works to collect it.
This can be rather expensive, as they typically charge between 3-5% of the amount collected. It has the advantages though of not only giving you more working capital, but freeing you from the tasks associated with doing it yourself.
Inheritances – Whether you've received them or not. If you have come into or will at some point come into a sum of money as an inheritance, it's possible to use this to get your business off the ground.
Obviously, this area is fraught with emotional landmines, and it is wise to tread cautiously, especially if you are asking for a portion of your promised inheritance prior to it actually being available. (They're still kicking!)
The obvious advantage to this kind of funds is that it is your money, and that presumably whoever left you this money would be pleased to see it put to such a noble purpose as starting your own business. Again, prudence is the keyword here!
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