Tap 90 Series, The it Factor  -  Money, money, money, First in series

The question I am asked most often is how to get money to start or grow your business. You have to sometimes look hard and never give up, but for a good business, there is almost always a way to start and grow.

Bank Financing

 Until you have already grown your business and been going for years, it is difficult, if not impossible to get funding from banks.  You need a solid track record and three to five years under your belt before this is a realistic option.  Even then, you need to show a consistent volume of business that is growing.  Bank financing in the early stages without personal guarantees from someone with a large bank account accounts for a very small percent of financing, less than ten percent.

Venture Capital

Nearly everyone has heard about startups getting millions and billions of dollars from venture capital.  Unless your business is highly scalable and can grow into a behemoth like Facebook, this is only available to a very few companies, in fact venture capital only accounts for about 10 percent of business financing.

Over the coming weeks we will be going through the 90 percent of financing that businesses use to start and grow that you may not know about, starting with factoring.

Tap the 90: Factoring

When you start a business, it is like you have just had a baby.  Babies are unpredictable and not very reliable.  People outside of your business see your business in that way, and no matter how a proud parent says how wonderful and talented their baby is, everyone else knows it is still just a baby.  Most people would not let a baby hold their most valuable and fragile possessions or they would likely see their treasures crash to the ground and break.

How to get people to see your business as something reliable, and not just a baby is to show the adult relationships your company has.  As you build and sell your product, if you are lucky enough to land a large and mature customer for your business, you can many times get money up front for the contracts you have with your adult customers. This is called factoring, and in essence you are borrowing their strength to finance building their product, service and building your business at the same time.

The amount of money you can get up front varies based on how strong and mature your customers. It can be half or up to 80 percent of the amount of the contract.  If you land a contract that extends over a period of time or is for a large number of units, you can get a substantial amount of money for your business.  You just assign the contract to pay the factoring company and get busy making your customer happy.

Steve Minard, Teds Community














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