As a startup, it’s a challenge to manage cash — don’t worry, we know. But one of the things that we’ve learned (through both personal experience and with helping other entrepreneurs) is that there of creative ways to bootstrap/finance your company. Let me provide a few examples:
- Leasing computers. Instead of going to the nearest electronic store and purchasing a new computer, go to one of the large manufactures (Dell, HP, etc.) and see if you can obtain a credit line to finance the computers you need. We’ve seen that most companies can usually obtain a $25k line of credit pretty quickly.
- Credit Cards: If you do your homework, there are quite a few credit cards out there that will allow a company obtain more than the standard $3-$5k limit.
- Other credit lines: one of the examples that I like to use is Google. For those of you that use Google adwords, do what you can to get a hold of an account manager to help you obtain a credit line on your ads. Instead of maxing out your credit cards every other day paying for your ads, they will often provide a credit line that helps you to manage your cash flow.
Those are just a few quick examples. Remember, cash is king. Do all that you can to keep cash in your hands and allow others to finance your business for you!
Another way of establishing good credit is to go to a bank and guarantee a small line of credit, using it to pay debts rather than your own cash. For example, set $1000 in a seperate account and use it to guarantee a line of credit. Draw on the line to pay invoices and pay back the line within terms. While you are charged interest, the rates are low enough that its a relatively cheap way to “buy” good credit
Comment by Chuck Wobby — April 11, 2008 @ 5:18 am
Another effective option is for the founders to learn as many skills as possible to keep cash in hand. It’s definitely slower, but can have rewards over the long term.
Comment by CK Woods — April 12, 2008 @ 8:11 pm
Rather than using credit cards, can’t you use Unsecured Lines of Credit, to finance your business. You can get unsecured lines of credit for up to $150K and unlike credit cards there will be no personal liability on you.
Comment by RandRFinance — April 18, 2008 @ 3:00 pm
Or you could avoid debt like the plague so you don’t end up stuck with $170K in SBA loans with your house as collateral, $15K in equipment leases, and $60K on personal credit cards. And that’s only half of it. Fortunately I’ve managed to pay most of that off by paying $10-15K in debt payments per month for the past few years, but having used just about every sort of debt financing known to man I will never use debt to finance a business again–EVER. Remember, debt disappears as fast as you have expenses, but is paid off only as fast as you have profits.
Comment by Joshua Steimle — April 18, 2008 @ 4:28 pm