First-time entrepreneurs will oftentimes want to learn more about how they can pay for their costs of having products and services before they receive money from their customers.  This is how most businesses conduct business.  Many entrepreneurs will find themselves in a position where they have a negative cash flow.  This is true even if they are making a lot of sales.  It can be a very painful moment for new entrepreneurs.  Sometimes, it doesn’t lead to financial success.

If business owners are smart enough to realize that this could be a potential problem, there are things that they can do before they get started.  It is a good idea to look for some extra capital before they take on the added expenses.  Angel investors can sometimes help, but in many cases, this is just not enough.  Angel investors will want to make sure that they are able to multiply their investments substantially before they decide to put money into a company.  This is why a lot of businesses that have stand-alone services are not able to get help from angel investors.

So, what are the other options?

It might be a good idea for the entrepreneur to discuss their needs with individuals who are wealthy and have experience in their particular industry.  If they have a good understanding of the industry, then they might be more willing to help them reach their goals as an entrepreneur.

Another option that many startup entrepreneurs consider is a revolving credit card.  This can be a high risk, but it can also be a way to get temporary funds at a low cost.  Take a look at how it actually works.  The owner of the company looks for two to three promotion credit cards that have a very low-interest rate.  They can use one credit card to pay off another credit card.  It is really quick, and it can be a great option.  The key is to make sure that the debts are paid within the grace period.  Credit cards can be a huge risk, mainly because it is very tempting to use them for everyday business needs instead of saving them for special expenses.

Here are a few recommendations:

  • Before getting started, it is good to project profit margins. What can a business owner do to increase the percentage or profit to help with improving the cash flow for the business in the long run?
  • Take some time to look into long term credit lines from banks. There are many that will back entrepreneurs.

Short term solutions, like credit cards, don’t offer long term solutions to entrepreneurial problems.  It is a good idea to work out any cash flow issues before they become a long term problem that ultimately causes the business to crash.

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