ChApter 4 | POTENTIAL SOURCES OF MONEY TO START OR ExPAND YOUR SMALL BUSINESS | 69
Trade Credit
After you establish a reliable record of
prompt payment with your suppliers,
normally they will consider extending
additional credit for your expansion
plans. Let them know of your plans well
in advance; if you begin delaying your
payments to finance your expansion
without notifying them, they may get
annoyed. They have an interest in seeing
you grow; after all, you’ll be buying more
from them in the future. Sometimes they
will even introduce you to their bankers
and investors if you approach them with a
well-thought-out business plan.Commercial Banks
Remember those banks that were so hard
to get money from when you started your
business? Well, once you can show a
profit able history, they become a lot more
friendly. As an established businessperson
you can often secure flexibility from banks
that you might not expect. For example, they
may lend you money and take a security
interest in your accounts receivable. Or
they may take a security interest in your
inventory, equipment, or other business
assets.Equipment Leasing Companies
Leasing companies own equipment that
they rent to businesses and individuals.
Some leasing companies are similar torental yards in that they have a supply
of equipment on hand that they rent out.
Sometimes these companies offer repair
and trade-in privileges in addition to short-
term rentals.
Other leasing companies—called full
finance leasing companies—do not take
physical possession of any equipment. You
find the equipment you want, and they buy
it for you. Full finance leasing companies
have no equipment inventory and offer
no return or repair services. They borrow
money from a bank, so you’ll have to pay
back the equipment cost plus interest and
a leasing company service fee over a fixed
time. Normally, you have the option of
buying the equipment for an additional
price at the end of the lease term. Full
finance leasing companies base their credit
decisions on your company’s financial
condition. They will want to see lots of
financial records from your company and
may request that you pledge some of your
personal assets to guarantee the lease. Of
course, make sure you understand what
you agree to before you sign anything.Accounts Receivable
Factoring Companies
Factoring companies—also called factors—
buy your accounts receivable at a discount.
Then, they collect your accounts at full
face value. This can be a very expensive
way to raise cash—I only recommend it
as a last resort. Some factors require that
your accounts pay them directly instead