“I just got a huge order from Shoprite!” my friend Peter said.
“Congratulations!” I said giving him a high five.
“But I have a problem,” he continued. “I don’t have the money to fulfill the order. They’re asking for 90-day payment terms. How can I ever finance so much inventory sitting on Shoprite’s shelves?”
“That’s the cash-flow battle, Pete,” I said while taking a seat for dinner.
“I’ve talked to my banker, my lines of credit are maxed out,” he said.
“Pete, there are good problems and bad problems — this is a good problem. I’m sure you’ll figure it out.”
“What do you mean?” Pete asked.
“A bad problem is not having sales. Your problem is based on growth. You’ve proven you have a successful product. Your problem is now financing success. That’s a different headache,” I said.
“A creative way to finance a business is negotiating similar terms with your suppliers. Why don’t you share with them this good news and ask them to support you with the same terms that Shoprite is demanding from you.”
“Could that be free financing?”
“It may be. It’s definitely a win-win deal. Everybody wins. Your suppliers win as you increase your sales. I’m always willing to support growth,” I said.
“I’ve always had a good relationship with all of them. This could definitely work,” Pete said.
“If that doesn’t work, there are another options, like factoring. This term factoring loans is a financing solution that helps companies unlock the cash sitting in your Shoprite unpaid receivables.”
“How does that work?” Pete asked.
“There are some financing people or companies who will be glad to wait for Shoprite’s 90-day payment and will take your invoices as collateral. You receive the cash in advance for a percentage of the invoice as a fee.”
“How cool is that!” Pete said with relief.
So, one creative financing option for bootstrapping your business?
There’s always a way to finance a good business!