If you’re in a cash crunch and need to find some financing for your company here are three ways you may have overlooked.

1. Vendor Financing

Stretching out trade payables from, say 30 days to 60 days, is a pretty common method for companies to improve their cash flow. Usually vendors are not very happy when this happens, and some even voice their disapproval in no uncertain terms. Most businesses are small businesses and stretching out payables only hurts everyone in the long run. Think about it: if you are depending on one of your customers to pay you within 30 days, and that customer doesn’t pay for 90 days, it can significantly affect your cash flow. If it’s one of your major customers, the impact can be quite serious. You don’t have the cash to pay your bills and so a ripple effect is caused on down the line.

This suggestion is different. If you’ve established a good relationship with your vendors, sometimes it’s possible to get them to agree to finance part of your company by extending their terms for a particularly large order for an extended length of time. If you’re a new company with little or no history, you could approach vendors showing them your business plan and documentation of orders you’ve already received. If the vendor is convinced that your company will be successful, and one of their better customers in the future, they may be willing to give you a break now.

Another alternative is to guarantee the vendor that they will be your exclusive supplier for an agreed to length of time in exchange for longer credit terms. Or you can offer to pay slightly higher than market price in exchange for longer credit terms. This method can be dangerous, because it sets the precedence of a higher price. When the longer terms are no longer necessary, it may be a challenge to decrease the price you pay the vendor.

Occasionally, it’s possible to convince a vendor to exchange a trade payable owed to them for a note payable instead, or possibly an equity position in your company.

2. Customers That Prepay

If you have successfully demonstrated to your customers that you deliver your merchandise to them on time, as ordered, you may be able to persuade one or more of them to put a deposit on their future orders, perhaps as much as 50%. You can add an incentive by decreasing your price a bit in exchange for the deposit. Or you can throw in a bonus: if they’ve ordered 100 items you give them 10 extra. New customers can also be asked for a deposit, especially if it’s a large or custom order.

3.Trade And Barter

Barter is probably one of the oldest forms of commerce. It is simply the exchange of goods or services for other goods, instead of using cash as the medium. The trade can be directly between the two parties or the trade can go through a barter exchange.

The barter exchange usually works on a point system, one point for every dollar. The exchange has members who have agreed to barter their services and products. Let’s say you need a new lap top, but the computer store doesn’t need your product/service. You earn points by bartering with those individuals and businesses who do need your product/service. You accumulate points through the exchange. When you have enough for the lap top, you ‘buy’ the lap top with your accumulated points. The exchange sometimes takes a small percentage of the points as a fee for their services.

Don’t be limited in your thinking as to what can be bartered. Approach bartering as you would any other sale or purchase. Deal with reputable companies. Don’t feel you have to discount your product. The barter purchase is reflected on your income statement as an expense. The barter sale (what you trade) is reflected as revenue.

Barter organizations can be found on the web, just put in trade and barter organization. Many cities have locally operated barter organizations. Contact your local chamber of commerce. The yellow pages give listings as well.

Use these three methods of coming up with cash for your company.

Do you need a small business loan, credit card, or grant? Want to know about other ways to finance your business? Find out more at 58 Ways to Find Money for Your Business or go to Credit Cards and You

Dee Power has co-authored several nonfiction books including Business Plan Basics, Inside Secrets to Venture Capital and Attracting Capital From Angels. Read her blog Debt Management

By Elizabeth Potts Weinstein

“It takes money to make money.” That saying is somewhat true. To create or expand your business empire you will need some funding to cover your expenses until your income comes in. That may take 2 months or 2 years, and it may require $200 or $200,000. The money can always be found, one way or another, but you need the right method for you.

Money comes from three sources, each with its own benefits, dangers, and costs. You will likely use two, if not all three of these types over the course of your enterprise — and you must understand each to evaluate which will work for you today, tomorrow, and 5 years from now.

#1 Method: Self Financing

When business owners have cash on hand, they typically look to their own bank account first as a simple form of financing. Self financing can be broken down two different ways, each with their own considerations. First, there are two types of self financing: lump-sum and bootstrapping. Second, self-financing can come from you, personally, or can come from your current business that finances another business, venture, service, or product line.

Lump-sum financing is when you have a fixed amount of money from the sale of a business or investment, an inheritance, personal savings, 401(k) cash-out (rarely a good idea) or other amount of cash that can be used to finance a business venture. The amount you have available is relatively fixed and can be viewed and tracked as a one-time investment.

Bootstrapping is constantly used by most small businesses, usually without conscious knowledge. Bootstrapping is where you pay for the new or expanding business through cash flow coming in from another source. The other source may be your day job, your spouse or partner’s job or business, a profitable business or product line, or passive investments (real estate, mutual funds, and bond).

Self-financing works when you need a small amount of money, when you have a large amount of money available, when you are comfortable with risk, or when you need money quickly. It also works when a profitable business can absorb investing in a new venture until the new venture takes off; assuming adequate cash flow projections and tracking has been done to ensure the new venture is not a never-ending profit leach.

#2 Method: Debt Financing

Debt financing is obtaining money that must be paid back to the lender, usually with interest. Similar to self-financing, debt financing may include both using your personal credit as well as the credit and security of the business to obtain a loan or line of credit.

Personal debt financing is readily available to most business owners. If you have a decent credit rating, you can obtain credit cards, a home equity line of credit, or a loan, without informing the bank about your business. You may obtain a loan from a family member or friend who knows about your business venture but who may not demand as rigorous standards as a formal bank.

Businesses may also obtain credit cards, lines of credit, and loans from banks and credit unions. Loans that are secured by the Small Business Administration (SBA) are available through banks providing lines of credit to small businesses that may not be able to obtain credit without the SBA guarantee. Alternative debt financing options such as Prosper.com enable individuals and businesses with lower credit ratings to obtain financing from diverse sources. But these private loans will typically be at interest rates higher than SBA loans.

#3 Method: Equity Financing

Equity financing is giving away ownership (equity) in your business, and potential future profits, in exchange for money (capital) today.

Investors can come in the form of silent partners, family, friends, or private investors who speculate in new companies. Angel Funding, wealthy individuals and groups who invest in small, high growth companies, typically buy stakes in companies for a few hundred thousand dollars. Venture Capital firms and Investment Banks typically are looking for companies where they will invest millions of dollars.

If you are planning to seek private investors, Angel Funding, Investment Banks, or Venture Capital, you will likely need more sophisticated financial reporting than is covered in this book. You will also need more lawyers and accountants.

How do you decide which type of financing to pursue?

Most likely, one type of financing is obviously not right for you now. You will probably use two or even all three types of financing for any one business, and your choice may change over the life of the business as you expand and add new ventures. You may be able to weed out certain choices because they are not available — you don’t have cash or another income source (self), you don’t have a good personal credit rating (debt), or your business has no exit plan (equity).

For each decision, you must track the benefits (Return on Investment), and the costs (interest, fees, and lost profits) of each type of financing. As your business grows, you may need to add or switch financing as prior financing methods become too expensive, are exhausted, or do not produce a sufficient return.

Elizabeth Potts Weinstein CFP JD, attorney, financial advisor, is the author of Grow Up! Strategies: The 7 Legal & Financial Strategies You Need to Up-Level Your Small Business. Learn how to take control of your cash flow in just 15 minutes per week in her free Special Report at http://www.GrowUpStrategies.com

About Prosper:
Prosper is an online community where people come together for person-to-person lending and borrowing money. Borrowing money through Prosper is fast and easy, and because other people can compete for your loan, the rates may be lower than you’d expect!

About Prosper loans:
All Prosper loans are unsecured 3-year fully amortized loans. The interest rate is fixed for the life of the loan and does not change in the event of late payment or for any other reason. Fixed monthly payments may be automatically deducted from the borrowers bank account. Borrowers may prepay any portion of the loan without penalty.

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