How to Raise Money for Your Business
Consider it Free Money! No interest! No monthly payments!
How often have you heard experts talking about small and medium-sized businesses failing because they were ‘under-capitalized’? But you don’t hear too often the remark that failing companies are over-indebted! I suggest that the latter happens far more frequently than the former.
So many new businesses start operating heavily laden with debt. The enthusiastic owners borrow on their house, hock their jewellery, touch their friends, pressure their family, and go through the rigours of a Government Small Business Administration (SBA) loan procedure, or some other well-meaning sponsored program. Their very first act having opened their doors to the public is to make their first month’s loan repayment. Even before the first customer ever sets foot on the premises. Even before the first item is sold and the first tiny piece of profit earned.
The first few months of any new business is tough – many would argue, the first few years are tough. If the burden of debt – or rather the burden of the monthly payments – is too great, a new business will never get out from under the load.
We advocate saying “Thank you, but No, Thank you,” to would-be lenders. You don’t need it! There are many, many ways a business, new or established, can get the money they need without borrowing. Money can be raised internally; it can be traded for; it can be wheedled out of suppliers, or competitors, or customers. In fact, there are so many people around willing to give you money, if you approach them in the right way, that you may never have to borrow again.
- Bank manager? Yes! He’s the fellow you ask to look after your hard-earned profits. Not the chap to borrow from, otherwise those hard-earned profits of yours will become easily-earned profits of his!
- Okay, you say. Give us some examples! Well, how about the air-conditioner repairman who wanted to start a small business but didn’t even have enough money to buy a truck? He approached local retailers with the offer of a 24-hour emergency repair service with no labor costs if they would purchase a 12-month contract. He sold enough contracts to buy a used truck, and started his business without debt.
- Then there was the well-established baker who signed a long-term purchase agreement with a supplier in return for a good discount. But he had the supplier pay the discount up front in the form of new equipment the baker needed.
- Or the used car dealer who purchases used cars at auction with money from several small investors. The dealer gets his inventory at no cost, the investors have their investments fully secured by the vehicles, and they both make a nice profit.
- Did I say “Get money from competitors?” Surely not?! There are actually a few ways to do this, but let us consider the lady who wanted to start a dog walking service. Many pet owners want some alternative to locking their dogs in kennels when they go on vacation. This lady thought she could visit the home, and feed and walk the dog, but soon found that she needed to be bonded for her customers security. A local kennel agreed to put up the money for the bond and let her use their name in return for a share of the profits. Plus, they steered customers her way – people who did not want to kennel their dogs (and whom they would have lost, anyway). She not only got the initial capital she needed from a competitor, she got customers, too!
These, and many other strategies, can be seen on the World Wide Web at “The Bi-Weekly Raise Money For Your Business Without Asking Your Bank Manager page“. A new strategy is uploaded every two weeks.
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