Funding A Business

Written by Linda Alexander
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Often, funding a business involves borrowing money. Instead of automatically turning to your bank or other lender, explore some other options. Depending on what you need the money for, there might be other ways to raise money.

First, consider borrowing from your suppliers. You might be able to negotiate longer payment terms with them, especially if you have had a successful relationship with them up to this point. Look at the payment terms you give to your customers too. Be sure to collect money on time when you are funding a business. This is your money, so you shouldn't have to wait for it.

You can also have different payment terms for different customers--and it might pay to be more generous with your larger clients. Realize that when you extend credit to customers, you are lending them your money for free. Funding a business should not involve losing more money than you have to.

Short-term Solutions to Funding a Business

If you have healthy, pending invoices, you could also consider factoring to raise money. You can sell your receivables at a discount and receive the cash immediately. This is a good short-term solution to raising money in a pinch. Other short-term solutions include credit cards, overdraft protection, and credit lines from the bank. However, if you leave those loans for too long, the interest quickly adds up.


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