There are other ways of raising cash other than borrowing money from banks.

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Most newly established businesses turn to banks to beef-up their cash position. But banks rarely lend money to newbie companies due to lack of track record of its financial operations. According to business experts, there are other ways of raising cash other than borrowing money from banks. Some of these suggestions are as follows:

  • Personal Lending. Instead of running to banks when in need of cash, try asking your affluent relatives to give you a credit line. They will be more flexible in case you need to defer your payments. Also, you can ask them to give you a lower or even an interest-free credit facility. If you go into “personal lending”, bear in mind that you have an obligation to pay your debts on a timely manner even if you are dealing with your relatives. Your blood relationship with your creditors is not an excuse for not paying your debts.
  • Personal Investors. Relatives and personal associates can also be a source of funds by encouraging them to invest money into your business. Present to them your business model, your business plans, your strategies, and your financial targets. Once you have convinced them to cash-in some money into your company, make sure you will deliver reasonable returns on their investments.
  • Consider Leasing. For start-up businesses, leasing an asset is a better option than “buying an asset” since the latter will only deplete your cash reserves. Leasing will not only improve your cash position but you can also charge your lease payments as business expense which helps in lowering your tax payments.
  • Trade Credits. Ask your suppliers to give you credit line/credit terms. This will give you more cash floating into your business. You can use these “floats” for purchasing supplies, raw materials or you can even use these for short-term investments.
  • Rev-up your Credit Policies. Make sure that your clients are paying you on time. Avoid giving long credit terms. Cash-basis or grace period of 30 days (or less) should be your standard credit term. For premium clients or big ticket accounts, credit extension beyond 30 days is acceptable but convince them to pay you a certain “down-payment”. This will also lessen the chances of non-payment.

As a rule, start-up businesses should stay as liquid as possible. If banks are not ready to give you a helping hand, you now have other options to think of.