How to build your business with no money down and receive infinite returns.

Which would you choose? 🤔

Here’s a scenario, and to keep it simple, let’s use simple numbers (the concepts hold true – the numbers will vary from business to business):

Your business provides goods and/or services to other business clients. You accept the credit demands of your customers and so you’re forced to wait 30 days from issuing invoices until you get paid. In the meantime, you could expand your business by taking on more customers, but working capital is limited. Here’s where the numbers are simplified – for every $1 you put into your business you receive $2 back once you get paid, and you start your business with… $2!

Your options are:

1. You complete two jobs and wait for 30 days to get paid $4. You’ve made $2 profit in 30 days. If you are able to, you could borrow more money to expand your business, but each time you still wait 30 days to make $2 in profit. Your internal ROI is 100% every 30 days.

2. You issue two 30 day invoice and immediately partially finance them using receivables finance, accessing an additional $1. You complete and issue a third invoice. After 30 days you receive $6 in payments. Finance costs were $0.05, leaving you with a profit of $3.95. Your internal ROI is 197.5% every 30 days.

3. You utilise payables finance and receivables finance combined – your suppliers are paid at the same time you receive payment from your customers. Your input into the two jobs is $0, yet you receive $4 in payments. Finance costs were $0.10, leaving you with a profit of $3.90. Your internal ROI is INFINITE. Instead of utilising your own cash as working capital, you re-assign it to expanding your business (equipment, staff, stock, advertising, etc), and continue to collect income without using your own working capital. Your business grows big enough to force out or buy out your “option 1 and 2” competitors.

Which would you choose? Certainly not option 1 – that’s the slowest path to success. Option 2 is better than option 1, but if you did have the opportunity to take option 3, would you?

The most confusing thing I heard (from an accountant of all people…) when talking about combining payables and receivables finance is “that must be expensive!”. Seriously? No money down yet receive income – where’s the expense? The comment showed absolutely not thought beyond individual jobs – no thought of the business as a whole.

You can run a larger business and reach your financial goals quicker when you use “other people’s money” wisely. Finance is geared towards the financially astute…..

We provide receivables finance and payables finance, as well as short term business loans. Contact us for a free consultation on how we could help you achieve your business cash flow goals.