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Cash flow help

arcola

Bronze Contributor
Speedway Pass
Feb 17, 2013
293
208
Los Angeles
Hello all

Brief intro - I’m 25, I’ve followed the TMF to the t I got a job in sales in my industry to learn (manufacturing home products and selling direct to major retailers, made 100 last year, then 200k this year). I have worked on building relationships with buyers at major retailers (Costco, tjmaxx, etc) and key suppliers in our industry.

Now I’m starting my own company with all my savings (about $160k) I have two retailers ready to cut POs for product - but I’m still finalizing the production process.

I put together a cash flow projection - and I’m realizing I’m going to be in a hole for the first couple months.

Customer wants to order about $111k of product which will cost me about 60k in cogs and labor to produce. My overheads are about 13k a month.. customer pays 30 days after Shipping, but more like 45 in reality and it takes me about 4 weeks to ship their order...

I’m not giving details to analyze - just to give an idea of the amounts

In February of next year, I project to have negative 35k in cash....and probably will not get payment until the end of that month


My question is - what do you guys do to help with cash flow? Does anyone know any good lines of credit to obtain? I already have an AMEX with no spending limit, but I don’t think it will be enough.
 
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Last edited:

WJK

Legendary Contributor
EPIC CONTRIBUTOR
Speedway Pass
Oct 9, 2017
2,558
5,907
Alaska
No what is that?
Go talk to your banker about factoring. It's a lien on your accounts receivable while you're waiting to get paid. It's sure NOT a cheap date, but it is a stop gap measure to tide you over. Or think about finding a white knight, a venture capitalist, or a money partner. It's one of the biggest reasons for business failure -- a lack of working capital. You already have your nose against that wall. It also commonly happens when your business grows too fast. There's a notorious gap period of time where most businesses lose money while they are going through the growing pains of rapid growth.
 

WJK

Legendary Contributor
EPIC CONTRIBUTOR
Speedway Pass
Oct 9, 2017
2,558
5,907
Alaska
My net margin is too low to factor I think. Do you think a line of credit would be better?
Only if you have something that the bank can attach for security. Banks generally have stock holders and FDIC auditors to please. The conventional/commercial loan business has become very difficult with the Frank Dodd banking laws and current underwriting lending standards.

Otherwise, you may need private funding, which usually means that you give up a portion of your business equity and a lot of your control in exchange for funding.

Or, I've seen people use their credit cards to fund their businesses. It depends on how strong your credit is, and how much risk you can take and still sleep.

Do you have a family member who can help?

Here's some other ideas.
Can negotiate with your supplier to hold off on their billing?
Are you warehousing or drop shipping? At what point does the liability for the goods transfer (FOB - free on board)? Can you use that issue to negotiate a better timing for you to pay for the goods?
Will your supplier take a partial payment and the balance when you get paid?
Can you offer the supplier interest or a premium price for more favorable terms?
Do you qualify for any special government programs? There are some funding programs through the World Bank, SBA and others programs? Some states also have special lending programs for businesses.

Good luck!
 
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