3 ways to finance your business without credit cards

If you’re in a cash crunch and need to find some financing for your business, here are three ways you may have overlooked.

1. Vendor Financing

Extending accounts payable from, say, 30 days to 60 days is a fairly common method for companies to improve their cash flow. Providers are generally unhappy when this happens, and some even express their disapproval in no uncertain terms. Most businesses are small businesses and stretching accounts payable only hurts everyone in the long run. Think about it: If you depend on one of your customers to pay you within 30 days, and that customer doesn’t pay for 90 days, it can significantly affect your cash flow. If it’s one of your biggest customers, the impact can be quite severe. You don’t have the cash to pay your bills, so there’s a ripple effect going forward.

This suggestion is different. If you have established a good relationship with your suppliers, it is sometimes possible to get them to agree to finance part of your business by extending your terms on a particularly large order for an extended period of time. If you’re a new business with little or no history, you can approach suppliers by showing them your business plan and documentation of orders you’ve already received. If the vendor is convinced that your business will be successful and one of your best customers in the future, he may be willing to give you a break now.

Another alternative is to guarantee the seller that it will be your exclusive supplier for an agreed period of time in exchange for longer credit terms. Or you can offer to pay a slightly higher price than the market in exchange for longer credit terms. This method can be dangerous, because it prioritizes a higher price. When longer lead times are no longer necessary, it can be challenging to lower the price you pay to the supplier.

Occasionally, a vendor may be persuaded to exchange a commercial payment due for a promissory note instead, or possibly an equity position in your company.

2. Clients who pay in advance

If you have successfully demonstrated to your customers that you deliver their merchandise on time, as ordered, you may be able to persuade one or more of them to put a deposit on their future orders, perhaps up to 50%. You can add an incentive by lowering your price a bit in exchange for the deposit. Or you can add a bonus: if they’ve ordered 100 items, you give them an extra 10. New customers may also be asked for a deposit, especially if it is a large or custom order.

3.Trade and barter

Bartering is probably one of the oldest forms of trade. It is simply the exchange of goods or services for other goods, rather than using cash as the medium. The trade may be directly between the two parties or the trade may go through a barter exchange.

Barter trading generally works on a points system, one point for every dollar. The exchange has members who have agreed to exchange their services and products. Let’s say you need a new laptop, but the computer store doesn’t need your product/service. You earn points exchanging with those people and companies that need your product/service. You accumulate points through redemption. When you have enough for the laptop, you will ‘buy’ the laptop with your accumulated points. The exchange sometimes takes a small percentage of the points as a fee for its services.

Don’t be limited in your thinking as to what can be traded. Approach bartering as you would any other sale or purchase. I deal with reputable companies. Don’t feel like you have to discount your product. The barter purchase is reflected on your income statement as an expense. The barter sale (what you barter) is reflected as income.

Barter organizations can be found on the web, just enter the trade and barter organization. Many cities have locally operated barter organizations. Contact your local chamber of commerce. The yellow pages also give listings.

Use these three methods to generate cash for your business.