How To Grow Your Business Without Strings Attached
Since the GFC, banks have hit the reset button on lending to small business, especially to start-ups. So, unless you have assets, like real estate, you’re going to find it tough to get funding from a traditional lender.
More to the point, after you’ve exhausted traditional loan options and tapped-out your bank account, what’s next?
In this tight lending climate, small business entrepreneurs may be tempted by an investor’s offer of cash. Investors usually have more industry experience than the entrepreneurs they finance. Some entrepreneurs also cling to irrational ideas.
But agreeing to such requests just because an investor offers cash is not always the best thing for the business – you could end up like a puppet on a string.
Let’s face it, you could have put years into finding a business strategy that works and then while negotiating the terms of his involvement, the investor asks for changes. Moving locations, changing the target market, firing key personnel, ad infinitum. “What the hell are they doing to my baby?” screams your inner monologue.
So, unless you’ve lucked out and gotten into bed with a benevolent angel investor (see wiki description), face the fact that you’re not going to be running the business on your terms. Which can be sort of be ok if you’re product or service is at a prototypical stage, but if you’re up and running and looking to grow…well?
If you have buyers for your product or service (and I am not talking about prospects sitting out there in the ether, but ones with bona fide orders to fulfill), there are other options.
First, you can borrow against accounts receivables to grow your business. You don’t need assets or a pristine credit history. Second, If you have firm orders from credit worthy customers, using the credit of your customers you can fund these through Purchase Order Finance to pay your suppliers and manufactures. Third, you can use inventory finance to maintain or increase stock levels in line with orders.