If you’re in the process of starting your own company, there’s a pretty good chance that you’ve already heard that it’s important that you create a business plan that consists of how much money you will need to run the day-to-day of your company. And unless you’re independently wealthy, one of the things that you are definitely going to need to do is make sure that you have secured some working capital just as soon as you possibly can.
If you’re curious to know some of the ways that you can go about doing so, you’re in luck. This article is going to share with you five ways that you can get the assistance that you need in order to get your company off the ground.
Consider your equity. When you’re just starting a business, it’s certainly not uncommon to rely on some of your equity; especially during your first year. This might be money that you have in your savings account or even money that some of your family members or friends have been willing to give, lend, or invest in your company.
Consider lines of credit. Although it’s not guaranteed that your bank will offer you a line of credit when it comes to starting up your business, if you happen to have a significant amount of equity and you can offer them some solid collateral, it’s something that they just might consider extending to you. What a line of credit does is make it possible for you to borrow money to spend on the short-term needs that your company may have. Lines of credit are usually for one year at a time and you are usually given 1-2 months within that same year to pay the money back.
Consider trade creditors. Another option that you might want to consider is using some of your trade creditors. If you’ve cultivated a solid working relationship with them, there’s a good chance that they may extend some of their terms so that you can fulfill some of your business’s larger orders. You should know that in many cases, term creditors will request proof of your orders beforehand. They also may put a lien on the orders as “collateral.” However, if you are confident that you can meet the orders, this shouldn’t be much of an issue.
Consider short-term loans. A very common way to secure some of the working capital that your business needs is to apply for a short-term loan through a local bank or credit union. For instance, if you were to consult with someone who works at the National Funding Small Business Loans about what you should keep in mind when looking for a business loan, one of the things that they might tell you is if you have good credit and a good relationship with your bank or credit union, this actually might be the best route to take. For more information on short-term loans, visit Biz.Finance.About.com and put “short-term loans” in the search field.
Consider factoring. There is one more thing that you should think about. It’s called factoring. Basically what factoring does is provide you with another short-term financing option. You fill a particular order, a factoring company comes in and purchases the accounts receivable and takes care of the collection. This approach tends to be more expensive than traditional bank financing, so make sure to do thorough research on it beforehand. For more information on the factoring process, visit Business Finance and put “working capital factoring” in the search field.