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Lane
Lane, JD, CFP, MBA, CRPS
Category: Finance
Satisfied Customers: 3899
Experience:  Providing Financial, Tax & Business advice since 1986
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I own a business and sales are fantastic. We have only been

Resolved Question:

I own a business and sales are fantastic. We have only been in business a few years and our sales are over doubling every year. The problem is I have invested all of my money into this business and I have a lot of inventory which is important to my business. Our rapid growth due to inventory purchases and advertising causes me to always be short in cash flow. I am not behind in any taxes and I always pay my payroll but I can never get caught up with all of the vendors we owe. I can not raise too many red flags with my inventory vendors because they will not sell us.

Any suggestions?
Submitted: 12 months ago.
Category: Finance
Expert:  Lane replied 12 months ago.

NPVAdvisor :

Hi, what most business owners would do in thei situation is use leverage...borrow to finance growth

NPVAdvisor :

Another alternative, of course it to raise capital through equity financing .. sell stock

NPVAdvisor :

In this situation, of excellent growth the cost for financing, whether through debt OR equity could very easily be less that the cost of slowing down your growth

NPVAdvisor :

With sales doubling every year, a commercial bank should be more than willing to loan operating funds and with a doubling of sales every year (100% growth per year) the cost is today's interest rate environment makes this, quite honestly, a no-brainer ... borrow and 2 to 5 % to finance growth at 100%

NPVAdvisor :

OR, again, elect S-corporation status , if you are not already there, and issue stock to new shareholders (btu itf theis were me ... at 100% growth per year, I'd rather borrow the money and keep 100% of the ownership)

NPVAdvisor :

Let me knw if you have questons

NPVAdvisor :

Lane

Expert:  Lane replied 12 months ago.
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Expert:  Lane replied 12 months ago.

Hi Dan,

... just checking back in here, as I never saw you come into the chat.

Let me know if you want to go further on this.

But again, at these kinds g growth rate, (as long as ANYTHING like what you're seeing is sustainable) borrowing or raising equity through equity financial make financial sense.

Let me know ...

Lane
Lane, JD, CFP, MBA, CRPS
Category: Finance
Satisfied Customers: 3899
Experience: Providing Financial, Tax & Business advice since 1986
Lane and 3 other Finance Specialists are ready to help you

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