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    4 Replies Latest reply on Apr 16, 2012 3:20 PM by dannowhite

    Working capital needed and no credit....Advice needed

    Sweeneyb Wayfarer

      This is a home care agency in need of working capital. It is a business that was started a few years ago with a great potential to grow over time due to rise in baby boomers, due to insurance/providers 45-90days net it makes it difficult to keep up with payroll. My credit is saturated and not in good standing due to loss of job which prompted the establishment of the company. I have invested everything I have and do not want to turn away potential clients that will generate more income.

      Advice is seriously needed on how to get working capital of about $250,000 with no credit, I know it sounds unattainable with lack of credit but I believe there's something out there. Serious Advice and solution Please

        • Re: Working capital needed and no credit....Advice needed
          mere_wood Scout

          Crowdsourcing (especially now with the new law passed) would be a good option, especially if you have a strong personal network, or feel your business is particularly important to a certain community. Does your business have separate credit than you personally? Or have you been running the business on your personal accounts?


          In other news, are the insurance or providers paying on time? Can you adjust your cash flow projections to represent the days you expect to be paid? Can you renegotiate to 30 day net? It seems that an easier solution would be to be able to get a better hold on your receivables and cash flow projections...something you won't have to worry about with your credit situation.




          • Re: Working capital needed and no credit....Advice needed
            koln123 Tracker

            Factoring would make the most sense for the 1st type of financing to look into based on what you have described.   The reason for this is because:

            You indicated that you are waiting 30-90 days to receive insurance money.    Why wait for 30 - 90 days to receive your money for services or goods you have already provided if you don't have to.    Go out and see if you can qualify for this type of financing.    The premise is you receive a high percentage of your invoices now.   Once the invoice is actually paid, you receive the remainder minus a fee.    The main reason this can be tremendously helpfull is of course, you don't have to wait for money. 


            Cash flow is most important to any business.   If you can get $20,000 now versus waiting 60 days, you will be better off getting it now.    After that you can look at trying to get the company which owes the money to you to pay sooner, as mentioned by another poster. 


            Another possibility is go to the small business administration site and check under loans and grants.   They have recently added some real grant financing, albeit for much lower amounts.


            Good Luck



              • Re: Working capital needed and no credit....Advice needed
                dannowhite Scout

                Most business owners make one of the largest mistakes when opening a business; using personal credit to fund their businesses.  They use personal credit cards to buy office supplies or equipment. They decide to take a little from retirement, the kid’s college fund, savings accounts, and/or under the mattress money to fund their business.  Once the business owner has maxed out their borrowing, some owners start to ask their spouses, friends, family members to help finance the business.

                Good? No, it’s actually a recipe for disaster

                Here’s a few examples of how serious your financial troubles can get when using your own personal credit in business:

                PROBLEM – What if you have maxed out your credit cards to fund the business and someone in your family needs to visit the hospital or you are too sick to work?  Most people in today’s economy use their credit cards as a safety cushion but in this instance, the cushion has been spent on the company.

                PROBLEM – The Small Business Administration reports that 95% of businesses close their doors within the first 5 years.  With that stat, don’t invest your personal savings just in case your business does close, then you would be left with nothing.

                PROBLEM – Don’t damage your personal credit in order to make in order to grow your business.  Financing requires a credit report and with each inquiry, points are taken off your credit score.  As you probably know, the lower your score is, the less likely you are to receive funding.  Also, when you finance your business, the lenders will reduce the amount they will lend to you personally.  Good luck with getting a loan to purchase that new home in a few months.

                PROBLEM – Adding to family debt won’t help your business in the long run.  Please don’t ask or persuade your spouse or parents to lend you money for the business that could possibly close its doors in the first 5 years.  Digging a hole you can’t get out of isn’t the answer your family wants to hear.

                PROBLEM – If your business closes its doors and you have invested all your personal money and assets, you have just lost everything you’ve spent your life building.