How to Act BIG When You’re Only Very Small

 In Daily Column

You'll be surprised at what funding you can obtain for those large style business transactions
You’ll be surprised at what funding you can obtain for those large style business transactions

Small business is the true engine of economic development and job growth. And today plenty of people, either dislocated in layoffs, finding it difficult to find the right kind of employment in a tough economy or simply yearning to strike out on their own can find some difficulties…but also some opportunities.

Undercapitalization generally tops the list of difficulties faced by small business owners just starting out. So unless you’ve received a large redundancy payout, you’re either going to have to dig into cash reserves, borrow against assets (such as your home) or sell your business plan to investors. Then again, maybe you don’t have to!

About 3 months ago, I was talking with a small importer based in Sydney’s inner west. They had been in business for about six months. The owners had borrowed against their homes to establish the business. They had three buyers in place and a reliable manufacturer in China. A fourth buyer (a well established retailer) had expressed interest in purchasing one of their product lines, but the partners were hesitant about fulfilling the order.

“We can’t afford to start a new job until we get paid for the last one,” one of them lamented.

I’m turning forty-eight this year. I have this habit now of leaning back in my chair, rolling my eyeballs and scrunching my feet into tight balls when I hear this type of rationalization. Don’t get me wrong, I love small business. I felt like asking them how the hell could they expect to grow if they didn’t take on new business?  But I didn’t. I am less confrontational these days.

“And you don’t feel comfortable borrowing against assets to start the job?” I ventured. To which he replied in the affirmative.

Jerry McGuire style, I declared: “Show me the orders! If they’re fair dinkum, I’ll pay your supplier to manufacture the goods in 48 hours.” There was silence at the other end of the line. “Are you still there?” I asked. “Yes,” came he managed to squeak out.

“When your customer has received the goods and paid for them, I’ll give you the profit minus my admin. fee. How’s that sound?” I asked.

“What about my assets,” he asked. “Keep them,” I said. “How long’s the contract last?” He asked sounding more hopeful. “You can turn it on and off like a tap,” I replied.

Using trade finance on an as-needs basis to finance growth and expansion is common practice for large companies  in Australia. In the UK, US and Europe it’s common practice for SMEs. Now that unsecured trade finance is available in Australia, small business can follow their overseas counterparts.

If you have credit-worthy buyers, are finding yourself stuck in the cash-flow-cycle and want to grow your business visit

FYI: It took me 72 hours to raise a letter of credit so that the manufacturer in China could proceed. (Solicitors have a habit of slowing business people down.) Anyway, the same importer told me he’ll use the margin from that job (which he wasn’t going to take on), to buy raw materials to start a new order.

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