1. Money

5 Ways to Finance Your Business in Difficult Financial Times

Creative Ways to Finance Your Small Business Start-up or Expansion

By

Whether you are starting a new business or you need money to grow or make improvements to your business, you are probably wondering if you will be able to find financing with the credit markets so tight right now. Your ability to find financing depends on thinking creatively and looking to alternative sources of financing. Here are 5 possibilities to get you thinking:

1. Using Trade Credit or Vendor Financing

Use your relationships with vendors and other businesses to acquire equipment and supplies or for construction. Using trade or vendor credit to finance start-up or expansion helps both businesses and builds relationships. Even if you are just starting out, you can establish relationships with other local businesses or suppliers by buying a few items and paying them off immediately. The more you do this, the more willing they will be to finance larger purchases later.

2. Selling Your Accounts Receivable

If you have an accounts receivable balance, you might want to consider accounts receivable factoring, which is basically the sale of your receivables to a company called a "factor," who will pay you a percentage of the balance and will collect the amounts owed. Your ability to get cash for receivables depends on their quality (how long they have been outstanding) and the type of receivable (personal or business), among other factors.

3. Equipment Leasing

If your expansion or start-up plans include equipment or vehicles, consider leasing instead of a loan. Even start-up businesses have the ability to lease equipment instead of buying it outright. You may be able to get a lease more easily than a bank loan, because the equipment vendor is likely to be eager to sell. Lease costs are often higher than loans, but that may not always be true, and your lease may qualify for depreciation deductions. Using

4. Using Business Credit

Using personal credit cards for business purposes is risky, because it can put your personal credit rating in jeopardy. Establishing and using business credit, including business credit cards, can save you money and put you in a better position to obtain bank financing.

5. Financing from Family and Friends

Consider the benefits and drawbacks of getting start-up or expansion financing from a family member or friend. Family/friend financing can be a good way to give you flexibility in payback, but you want to create an "arms-length" transaction so you don't destroy the relationship.
Related Video
Adam Gerber on advertising business models
Jameson Hsu on Online Gaming and Advertising

©2014 About.com. All rights reserved.