VIEWS: 3 PAGES: 1 POSTED ON: 4/11/2011
?In previous posts, there were different ways on how to start your business using bootstrapping techniques. Theres 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 wont 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.
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