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Lane
Lane, JD, CFP, MBA, CRPS
Category: Finance
Satisfied Customers: 11123
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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I own a business and sales are fantastic. We have only been

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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?

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


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
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