Securing Credit For Capital Investment
This client identified the burgeoning business of on line travel services.
Establishing a business, any business, is difficult without capital. Establishing a business based on commission income earned from completed sales is almost unthinkable.
Use vendor credit as the source of funding to purchase website inventory for customers.
We identified vendors who were willing to allow the client to post ads on their websites without immediate payment. We worked out terms that we would pay the vendors 45 days after receiving their bills. We worked out terms with our customers that we would be paid within thirty days of invoicing them. At the end of the month, as you can see, we were able to use the vendors additional fifteen days grace period to finance the operations of the business.
Compounding the benefit of the plan is that the bigger the size of the company’s sales, the greater the ‘float’ or company capital. By constantly growing the top line of sales, the company could grow geometrically.
The company did grow and the founders were able to realize a substantial profit at the time of a financing event.
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