Wheels Coming Off of Your Business?
The credit market is so tight you can probably turn your banker upside down and shake him (or her) and not a dime will fall to the ground.
So what do small businesses or solopreneurs do to create a little cash flow when even bigger companies are finding it impossible to borrow money? The obvious solutions are usually to work harder in hopes of generating more income, or cut your expenditures in order to increase profitability.
But an often overlooked option is to get money from your clients and customers in advance of work, service, or goods you will be providing to them. Instead of going to a lender to borrow money against the income you anticipate in the future, why not skip that step and try to get your hands on that future income now?
The challenge is to turn business on the books (or anticipated business) into cash in hand. For example, say you write press releases for your clients for a per-project fee. At $300 per release, a client who buys one release per month is going to be good for $1500 between August 1 and December 31 of this year.
Now suppose you could convince your client to pay you $1200 today for those future five media releases. The client saves $300—which is the same as receiving one release free. And you have $1200 in your hands now, because you have essentially discounted this client’s releases to $240 apiece in exchange for his or her prepayment.
Yes, that’s a high rate of interest, if you want to look at it that way. But if you are using the $1200 to pay off debt or to prevent incurring new debt, then the cost of the “cash advance” your client provided you, just came down. Now go get ten clients signed up for your new discounted prepayment plan, and suddenly you have an additional $12,000 in hand.
Just Because You Are a Small Business Doesn’t Mean You Have to Think Small
Bigger businesses have been preselling their goods and services for years, yet many smaller businesses, independent contractors, consultants, or coaches never consider this as a way to raise money. Advance payment comes with the requisite that you have to be responsible and plan how and when you will use the money, but it also comes with the secondary benefit of guaranteed work from your client. And with a little creativity, almost every type of business can find some goods or services to repackage and pre-sell to clients who may be very appreciative of the discount you are offering them.
To for more ideas, go to: Six Ways To Raise Cash Now at Forbes.com
