Home-based entrepreneurs in need of business capital have many different, often unconventional, ways to raise money. After reading this article, there will be no room for doubt in the mind of even the most ambitious pessimist about raising business capital. Any business owner can raise money if he or she is willing to put in the effort. Here we introduce you to some creative ways to raise money for business capital.
Trade Credit
Credit on a good or service that you require for your home business - known as trade credit - is a common way to increase cash flow. Standard terms for payment are usually between 30 and 90 days. To get trade credit, provide a marketing plan for generating revenue from your inventory or other business purchase during "float" time (the period of time between order date and the date payment is due to the supplier). You may be surprised to see how many suppliers will give your business credit if you present a credible, home-based image.
Use a Contract, Purchase Order or a Letter of Intent
Convince your supplier or other person whom you do business to grant you credit by showing your own customers' written expression of desire to purchase. The best documents to substantiate this are legally binding contracts or purchase orders. If not obtainable, you can ask your customer to write a letter of intent to purchase an approximate amount of your product within a specified time period. Bottom Line: Convince your supplier you can move their goods or services and that they will get paid.
Factoring
Firms or individuals called "Factors" convert your accounts receivable into working capital, either immediately upon invoicing or when invoices come due. Here's how it works: You submit your customer's order information to the factor for credit approval. Typically, the factor will purchase your receivables and advance you 80 percent of their face value. The remaining 20 percent is held as a reserve to offset uncollectable amounts. The reserve is released after the bill is paid, less any deductions for uncollectables and the factor's service fee, known as a discount (usually 1.5 to 5 percent).
Bank Financing of Receivables
The major difference between banks and factors is that banks don't purchase receivables; they lend against them. Since you remain the owner of these accounts, you must do your own credit checks and absorb any collection cost. Most banks
