Does your company need capital and it doesn't qualify for traditional bank financing? Below are sources of capital that may be useful to you.

Consignment

If you have a retail shop and need inventory, you can approach potential vendors or suppliers to consign their products to you. You sign an agreement that you will sell the items at the price the vendor specifies. You do not own the items. You don't pay the vendor until the customer buys the item. The offset is instead of the normal keystone or 100% markup (you buy the item for $5.00 wholesale and sell it for $10.00 retail) you only receive a commission of between 10% to 25%. But you don't have to use precious cash to get merchandise for your store.

Home Equity Loan

Quite a few of us have established equity in our homes, sometimes tens of thousands of dollars of equity. Most mortgage companies are happy to lend owners a portion of that equity with no constraints on how we use the money. These days, refinancing isn’t a struggle, and if your credit rating is good, you can have the cash in hand within 30 days. Or you can get a commitment for the loan of a second mortgage and draw down the money as needed.

There are tons of scams in this area, especially if your credit isn’t A+. And keep in mind, if you default on the second mortgage, you can lose your home for much less than the value.

Credit Card Financing

Let's face it, almost every entrepreneur has used credit cards to purchase an asset for their business or supplies when company funds were low. If your credit is good, you are most likely inundated with offers of pre-approved credit cards. If there is no other way to finance your business and you like living on the edge of disaster, you can finance your company with credit card debt.

When shopping for a business credit card, it's important to choose one that fits your business. Get four of five credit cards, with credit limits between $5,000 to $10,000 each and you've put together a source of capital from $20,000 to $50,000. This is expensive debt with interest rates from 15% to 25%. And it's dangerous. You've maxed out your credit lines, so you have no emergency funds for your personal use. Additionally, if you do get an investor interested, your credit card debt may not be recognized as a company debt. Again, the investor will probably not allow his/her funds to be used to pay off your personal debt.

Asset Sales

Selling off company assets, even a division of your company, is a tried and true method of raising capital. You might have equipment that's not being used, or a building and land that has a higher value to someone else than it does to you. You can sell off an entire product line that doesn’t fit well with your company's focus. You can sell intellectual property such as patents, formulas, customer lists, or trade secrets.

Vendor Financing

Stretching out trade payables from, say 30 days to 60 days, is a pretty common method for companies to improve their cash flow. Usually vendors are not very happy when this happens, and some even voice their disapproval in no uncertain terms. Most businesses are small businesses and stretching out payables only hurts everyone in the long run. Think about it: if you are depending on one of your customers to pay you within 30 days, and that customer doesn't pay for 90 days, it can significantly affect your cash flow. If it's one of your major customers, the impact can be quite serious. You don't have the cash to pay your bills and so a ripple effect is caused on down the line.

This suggestion is different. If you've established a good relationship with your vendors, sometimes it's possible to get them to agree to finance part of your company by extending their terms for a particularly large order for an extended length of time. If you're a new company with little or no history, you could approach vendors showing them your business plan and documentation of orders you've already received. If the vendor is convinced that your company will be successful, and one of their better customers in the future, they may be willing to give you a break now.

Another alternative is to guarantee the vendor that they will be your exclusive supplier for an agreed to length of time in exchange for longer credit terms. Or you can offer to pay slightly higher than market price in exchange for longer credit terms. This method can be dangerous, because it sets the precedence of a higher price. When the longer terms are no longer necessary, it may be a challenge to decrease the price you pay the vendor.

Occasionally, it's possible to convince a vendor to exchange a trade payable owed to them for a note payable instead, or possibly an equity position in your company.

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