Letters of Credit
Issued to your funding source on your behalf, as a guarantee that you will pay. If you don’t pay the issuer does. Your bank might issue the L/C based on your pledge of a receivable or other hard asset.
A great method of financing. Funds are advanced against goods sold, accepted and not yet paid for. Normal advances on accounts receivable are 70% to 85%. The lenders are looking for account receivables that have ninety (90) days or less to be paid. Funding is available for older accounts receivable, but the rates are dramatic higher.
Purchase Order Advances
Leveraging your future. If you have purchase orders with your customer base, you may be able to get advances towards their completion. The typical advance is less than 50%, and the rates are very high. Don’t choose this one unless there’s no other way.
You can think of this as renting assets. You gain the capital equipment you need and agree to pay rent for a specific period of time. There is no interest rate here, but the rates tend to be higher than commercial loans. Some of that is offset by being able to expense 100% the payments (pretax). Check with your tax accountant to be sure.
Asset Sale Lease-Backs
If you are cash poor and asset heavy, this may work for you. Here you are selling your asset for cash to a funding source who leases it back to you (typically with a lease end purchase option). The downside of this approach may be capital gains or sales tax.
A do it yourself stock offering. A great way to raise small amounts of capital ($500,000 or less) with a few investors (typically less than 35). These are now available in a boiler plate format in most states. Contact your state’s Department of Corporations for information on what is required to stay out of trouble.
504, 505 & 506 Offerings.
Forms of stock offerings that let you raise more money and have more investors than private placements. These are great vehicles if you take the time to figure them out. Contact the SEC, they send you the rules and the forms.
You can look for one or form your own. Limited partnerships usually exist for the purpose of investing. The general partner has all the exposure and management duties, while the limited partners have put up all the money. There are numerous Limited Partnerships out there that have been formed to invest in businesses. You can search them out or inquire with your State as to the requirements for forming your own.