Sally owns a small women's apparel design company. Because of the poor economy, her sales have been slow, and she is barely able to make payroll. Last week, she received a surprise order for a...
Sally owns a small women's apparel design company. Because of the poor economy, her sales have been slow, and she is barely able to make payroll. Last week, she received a surprise order for a large quantity of designs from one of her lines. She'll need to order material and other supplies to fulfill the order, but doesn't have the cash to pay. What are her options?
Sally has several options. She can take out a small business loan. This will depend on her credit situation, of course. If she has good credit, it can be easy to get. She just has to prove that her business is solvent. What might be a better option in the long run is a line of credit for her business. This is kind of like a credit card for a business. Basically, the business can take temporary credit for things like materials and goods when it is cash-strapped and does not have funds, and then pay the money back as soon as the order comes in. Sometimes businesses can also use small business credit cards to do the same thing, but the interest rates are usually higher than they would be for a line of credit.
Another option is to ask for payment for the order when the order is placed. If this is not common in the business, they can ask for a small portion of the order. They might also be able to get small some of the materials for the order on credit, without paying. This is actually pretty common in business. After all, the company placed the order with Sally without paying. Sally might be able to get some of her supplies on account with some of her suppliers and pay for them later, after she has been paid.