One of the most important things a business owner can do early in the pursuit of opportunity is establish relationships with multiple financial sources. Do this by laying out your goals, and committing to specific milestones and timeframes. This isn’t the time to ask for money, but to learn from each funding source what specific results you have to deliver for them to be interested in working with you in the future. This builds trust and confidence and an important relationship. Then, meet with the bankers or funding sources periodically to update them on your progress or explain any deviations from the plan.
Once you proceed with your plan and reach various milestones, it’s time to talk about your funding needs.
IN THIS STEP, WE'LL TACKLE FIVE WAYS TO FUND YOUR BUSINESS:
- Vendor and Customer Financing
- Debt Financing
- Angel Investors
- Sophisticated Financial Partners
- Initial Public Offering (IPO)
Vendor and Customer Financing
The least expensive way to finance growth is to work with your vendors and customers. If you‘re established and have a great supplier base, go to them and explain your growth plan and various initiatives. Ask them to work with you on extended payment terms. If you have 30-days, get them to stretch it to 60, 75 or even 90 for a defined period of time. Once you get through, use the experience to look for other forms of financing. Your cooperative suppliers will be rewarded with a bigger customer (you) and more timely payment terms.
If you have long-standing customers who depend on you, ask them for a large purchase order that can be factored (see below), or to accept early delivery of goods, or to pre-pay for a large order. If the value you propose in return is meaningful and hard to replace, it could be the best and least expensive form of financing there is.