Bootstrapping Using Trade Credit

Document Sample
Bootstrapping Using Trade Credit Powered By Docstoc
					In previous posts, there were different ways on how to start your business using
bootstrapping techniques. There’s one other technique that has not been discussed that
much and that is trade credit. In simple terms, this is when a company has
arrangements with their suppliers to provide them with goods and services and the
payment would be after the delivery, without the interest.
 At the onset, your suppliers would not be giving you any trade credit. You would
have to pay your suppliers in cash once they have delivered the products and services
you need. After you have established and developed a good business relationship, it
may then be possible for them to give you trade credit. You have to take note that
suppliers, like all entrepreneurs, put a high premium on trust on all their business
dealings. So you need to pay your bills on time so that they know they can trust you.
After you have cultivated trust between you and your suppliers, you can then ask and
negotiate with your suppliers.
 During your negotiations, you have to present a sound financial plan of your
business. Even though you have been doing business with them for quite some time,
they still need to review your financial plan so that they can be assured that when they
extend a trade credit to you, you would have the resources to pay them back. Trade
credits have long been a normal practice in the business industry especially those who
opted bootstrapping as their way to get capital. As a small business owner, you have
to plan carefully so that you would not have any delinquencies with your suppliers
and you won’t have to give back the supplies they sent you. Effectively using trade
credit would be advantageous since the capital needed would be reduced and you can
use the cash on hand for other more pressing expenses in your business.