There are other forms and sources of Working Capital (investment required to pay short term expenses.)
In short, do some creative thinking before running cap-in-hand to a money lender.
We were starting a small retail operation with that typical investment of $5,000 in an industry where a starter inventory was $500,000 minimum.
A mentor gained through a government subsidized program told us of a supplier who had given him terms of two years when he first started his business. Our mentor thought this supplier would recognize some potential in us.
Using the mentor as a reference, we asked the supplier what terms he could offer us. He didn't offer the two-year payment term but, he did offer, "How about 120 days or a phone call." We innocently asked what that meant. He said, "You try to pay within 120 days and if you can't pay the full amount, call me and tell me how much you can pay."
Another supplier in that same industry gave us a generous supply on the usual 60-day terms because we had once done a favor for his daughter. It turned out the ticket prices were slightly higher than our customers' price range.
We learned the owner was in his office on Saturday mornings taking advantage of the quieter time. Each Saturday morning at 7:55 a.m., before the long distance rates went up on the west coast, we called to tell him what kind of week we had and how much we could pay. After awhile he would answer by saying, "Hi Gerry – what kind of a week did you have?" He never asked how much I could send. He seemed to understand I was sending as much as our business could afford.
Later, we found this highly respected leader was telling other manufacturers they could trust that little retailer out there in _____ to pay their bills in full. That kind of credit rating avoided raising a lot of cash for working capital.
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