- 1). Get a bank loan. Short-term loans are usually for one to three years. These are suitable for start-ups, which generally do not qualify for longer-term loans. Loans may be unsecured or may be secured by real estate and other tangible assets. Use loans to finance projects, buy equipment or for construction and renovation. Banks typically require personal and business credit history for loan applications. In addition to the regular interest payments, banks may require regular financial reports and other documents.
- 2). Secure a line of credit. Use it for your working capital needs, meaning paying the short-term bills while waiting for customer payments. You pay interest only on the outstanding balance, which can normally be paid off at any time. Lines of credit are usually offered for periods ranging from 90 days to three years or more, and they can be secured or unsecured. The Small Business Administration's CAPLines program helps small businesses meet their short-term and cyclical working-capital needs.
- 3). Apply for a business credit card, which is a higher-interest unsecured form of line of credit. Banks and other financial institutions offer business credit cards, which are convenient and quick sources of cash for emergency purchases. However, they can be costly because the interest rates are generally much higher than other forms of debt.
- 4). Engage in leasing arrangements with your bank. Consider leasing rather than purchasing big-ticket items such as equipment, office buildings or computer servers. Some vendors offer prearranged bank leasing as one of the purchase options for equipment, machinery or automobiles.
- 5). Obtain asset-based financing, such as accounts-receivable financing or factoring. Accounts-receivable financing uses the receivables --- the credit sales that have not yet been paid --- as collateral. The loan is paid off as the receivables are collected. Factoring involves selling accounts receivables to a third party for a discount, and the third party takes over the collections process for a fee. The disadvantage of this form of financing is the expense, because it increases your costs and cuts into profits. The advantage is that you have quick access to cash.
- 6). Turn some of your cash payments into credit payments. Ask vendors to extend credit for some of your regular supplies. This arrangement makes you a borrower and the supplier a lender, and you are obligated to settle your accounts according to the credit terms.