A user recently asked this question:

I am in the ____ _______ business. I have started with nothing, and its been four years. I put all the money back into stock and machines. I was trying to get an investor, but don't know where to look. I have been doing large numbers but have had zero working capital. It has caused a snowball effect on my bank accounts to the sum of $12,000 a year in fees. This is no joke. I can't seem to get ahead, and now I am feeling beat. I have tried so hard and feel I will loose my shop if I can't find working capital. Do you have any ideas? BTW I am not credit capable.

These are difficult times, and I admire your ability to survive four years through difficult circumstances. You have to start thinking differently and be willing to learn and change your approach.

Not knowing anything about your specific situation, I am unable to provide you with any specific suggestions or advice. However, I have seen some similar situations in the past and offer the following observations and suggestions. I urge CAUTION when reading my observations and comments. These ideas may or may not be applicable to your specific situation. Seek professional guidance before making changes or implementing any of these ideas.
Preventative Maintenance

Learning how to write a business plan is an important business skill. Plus you can review it on a regular basis which can help to head off problems before they become too big to handle.

Stop juggling -- Come Up With A Turn Around Plan

Uncontrolled growth in a business with little working capital, can easily lead to a self inflicted, slow business failure. When a business is growing quickly, it puts a strain on the financial "oxygen" of the business. Your available cash is like oxygen. Without a good supply of fresh oxygen, your business will not be able to run a good race without running out of air.

Sales drives the business to run harder and harder. However, the harder you push the more your debts (accounts payable) increase the more difficult it is to find the cash to keep everyone happy. Eventually the business could suffocate for a lack of oxygen (cash).

It might be best to do less business. Sometimes you are better off saying NO than trying to make things work when you know you are already hard pressed to make ends meet. The extra time you have (because you have less work to do) can be re-directed to creating a plan and spending time investigating your options.

Survival And Planning Options....

This is a tough situation and you have limited options. You must be committed to communicating with all suppliers, staff and lenders/investors in an ethical and moral manner. Be careful not to mislead, understate or overestimate the current situation. The only chance you have when things have gone wrong is to be honest and take your medicine like an adult. If your business is a sound money maker with healthy profits -- you may be able to salvage it.

• Creative Selling: obviously you need cash. One option would be to try and increase your profit margins by either increasing prices and/or selling additional products/services. For example, there is a restaurant in our area that is selling a 2 for 1 coupon book for $49.95 that contains something like 25, 2 for 1 coupons. They get a cash infusion and the odds are not everyone who buys the book will use every coupon. The most valuable thing you have right now is your customer list. Are there businesses that have related products/services that fit your customers needs? You could offer them access to your customer list in exchange for 50% of the profits. Stop and think, take a long look at your customers' needs, and look for businesses that offer a product or service that your customers need and are buying somewhere else.
• Factoring: if you sell your services/products on credit and you have a large amount of outstanding accounts payable -- factoring companies may advance you cash based upon your outstanding invoices. Basically, they will advance you a percentage based upon the credit worthiness of your customers.
• Ask Your Accountant: First, get some help. Talk to your accountant, if you do not have one -- get one. You may be able to save the business and it may be too far gone. Either way, it is best to screw up your courage and go see someone who will tell you the truth and give you unbiased advice.
• Legal Options: you should also seek legal counsel to get advice on your specific situation and understand the legal ramifications of certain plans and actions you may be considering.
• Speak To Your Bank: if you are spending $12,000 a year on bank fees -- you are either paying interest costs on overdrafts on your checking account or you may be incurring extra service charges to manage your account and cover the checks you write. Ask them again.
• Investors: there are not a lot of people willing to put money into a company that is in trouble. If you do find one -- they will want control of the company and you should seriously consider the offer.
• Suppliers & Landlord: talk to your suppliers or landlord about giving you an incentive to keep the business going. Ask them to forgive old debt (120 + days) and as for better payment terms. Basically, you are asking them to help keep you in business. Be VERY careful with this option -- you run the risk of scaring them which could result in them shutting down your current credit arrangements. Also, be careful that you do not twist or mislead them as to your ability to repay them. I also strongly suggest that if you speak directly with the business owner or senior management -- they may be more open to helping out than you think.
• Restructure Management: this basically comes down to you firing yourself as manager and finding someone to take over the day-today affairs. Perhaps there is someone in your family or circle of friends that might be willing to take over the management of your business and the cash flow. Then you could be freed up to do what you do best -- make sales and customer service.

Shut Down The Business

Of course there is always the option of closing down the business. It is the least appealing -- but it may be the best choice. Making a decision to shut the business down is more mature and business like than waiting for all the cards to come tumbling down.

By choosing to shut the business down you have an opportunity to do an orderly liquidation. You would get more cash for your assets and inventory in an orderly liquidation than a foreclosure. Good luck!