Customers and Suppliers
1. What's Customer and Supplier Financing?
2. Who is This Good For?
3. When is This the Best Choice for
Me?
4. When is This Not Advised?
5. Tips for Getting The Money.
6. Ingredients You'll Need on
Hand.
7. Watch Out For...
1. What is Customer and Supplier Financing?
Loans or equity investments from the people who buy your goods
and services or sell you theirs. They may invest in your company
because you can more nimbly develop new products or methods they
need, or you can provide a specialty they rely on, or they just
want to rev up your growth to better serve their demands.
2. Who is This Good For?
An entrepreneur with customers or suppliers who have prospered
from doing business with your company. Maybe you're the exclusive
supplier of an item much coveted by your customer's competitors.
Or you've become a crucial link in your supplier's distribution
network.
3. When is This the Best Choice for Me
When you've been in business long enough to have a reputation
as a reliable business owner, and built strong relationships with
customers and suppliers;
4. When is This Not Advised?
When your customer or supplier may also be your competitor; being
too close to them may give them access to information that may make
them stronger and you weaker;
When your customers' or suppliers' competitors will stop doing
business with you if they perceive you're too close;
5. Tips for Getting The Money
Stress the win-win aspect of such an alliance. Usually, there's
got to be something in it for them besides the money you'll make;
it has to help them improve their business or their lives.
Scout around in your supplier or customer's industry to find out
if investments of the sort that you propose are normal or unusual.
Then you can position your proposition as either routine or groundbreaking.
6. Ingredients You'll Need on Hand
7. Watch Out For...
Being too close for comfort. "If you're going through growing
pains you might not want them to see that," says Mary Lore, a Farmington
Hills, MI based entrepreneur and small business consultant. "Once
they're an investor, they'll know a lot that you might not want
a customer to know, like your costs, profit levels, and how you
make the product or perform the service."
With a customer investor, you'll be guaranteeing at least one
market for your goods and services. But other customers might be
turned off and replace you. With a supplier investor, you may not
have as much freedom to shop around for better deals on goods and
services.
Investing could whet your investors' appetite for acquisition.
They may decide that if they're bankrolling you, they may as well
own you.
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