What is your main source of Financing?

[orion_joel]

All businesses finance their operation in different ways and means. I am interested to hear how you finance your business and if you believe that it provides you the best option in growth and flexibility.

Myself i have financed my business primarily though a supplier account that i managed to secure and get the limit increased on. This only was useful until i started getting large order's for product that they did not stock. After this i turned mostly to credit cards, to this day i have not paid a cent of interest on the cards, with the exception of a bank mistake which they claim to not be able to reverse, it was about $20 and spent more time then i wanted trying to fix it and gave up in the end. The biggest problem i had with credit cards, at the peak of my business i was just finding that the limits on the one i had was to small. However now i am at the point that i am trying to find ways that i can make use of this limit to improve my business.

Anyway please feel free to share, just general idea is fine.

[Spider]

I think what you are referring to, Joel, might be called Deficit Financing. I don't recommend it!

Now that I'm retired, I have no need for "business financing" but back in the day when I owned and managed a construction company all work was financed out of project cashflow - you do work, you get paid, you pay your men, you buy materials, you do more work, you get paid....

The big thing for me was our Monthly Cashflow Projection. Every month I would project the next 12 months cashflow - I would anticipate each month's expenses (labor, materials, overheads) and each month's income (progress payments.) I would set this out for the coming 12 months, and do this exercise every month.

Obviously, the further out you prjected, the less accurate and more of a guess it was, but the next month or two could be pretty accurately projected. So, I would know very accurately when and why I might be short of cash, and by how much. Which means I could take steps to prevent it.

I would send a copy of this to my bank manager, even though it wasn't necessary, they didn't ask for it, and I had no loans to justify it. But still they were sent a copy, every month. And there were one or two occasions I had to phone the bank on a Thursday afternoon to say we were not able to meet Friday's payroll, why we couldn't (an anticipated payment hadn't arrived), pointed to the specific payment on the Cashflow Projection - and each time the bank manager gave us the greenlight to pay the men saying they would cover it.

Demonstrating you run a tight and efficient ship can go a long way with a bank manager. We didn't start out in debt and we didn't run our business on debt. And I am eternally grateful for the bank manager that refused my first application for a loan. It made me find another way - a better way - Positive Cash Financing.

[orion_joel]

Frederick, I think that your idea here is a very good way to run a business. I believe it is something that most business do aspire to, and would i think help them to build a much strong more stable business.

This is something that i could have done, i have always had more then sufficient capital at my disposal to cover the order's without incurring debt, however i do believe that i what i have actually done has taken advantage of debt to further profit. To date as i mentioned debt has not cost me anything it has actually made me money, using my supplier account and credit card, has some months allowed me to put anything up to $25,00 to $50,000 extra into short term interest bearing deposits. This may not add up to a lot on small amounts for short periods but when you can put $20,000 in an account at 7%pa for 30 days without it costing you a cent, you can make hundreds if not thousands of dollars per year in additional interest.

While i am sure that this method will not work for everyone because you do need to pay attention to payment deadlines and keep a close eye on your money it can really play a good part in some business that have a quick turn around on selling product to cash in the bank but dont have to pay for the product straight away. I do agree that it is probably not the recommended method for financing a business if managed properly i think it can provide a good additional source of income for the business.

[mortgage loan]

its always different to a person or a firm, if personal matter than always looking for lower interest rate is first priority, first looking from bank, than financer than lander... but nice question , please share your thoughts here.

[phanio]

Any way that you can! No matter how you finance your company, keep in mind your cash flow. Make sure that more money is coming in than going out. If more is going out, you don't need new financing. Look to improve your internal structure.

There are not a lot of good, cheap options for start-up or small businesses. Take what you can get and focus on growing your business. When the business grows you will have more power to negoitate and other options will open to you.

Just watch your cash flow and pay off the largest interest first.