Out on a limb: when the money tree looks dry, sometimes you just have to create your own branch

Entrepreneur, March, 2003 by Crystal Detamore-Rodman

"It took a lot of wining and dining to get him to turn over his company for nothing on the dream that it could be big," says Johnson. The union didn't last--the partner was terminated after 10 months for failing to abide by their legal agreement. "Although we worked four months negotiating, [the agreement] had to be in writing with the intention that we'd put it in a drawer and never look at it again," he says. "You only pull those things out when things go awry. And, unfortunately, we had to do that."

If not for a resourceful nature and a willingness to pursue an unusual financing strategy when other options were nonexistent, Johnson's company would not have reached its full potential. The reality is that a multitude of factors, including Johnson's age and lack of business experience, contributed to his funding shortfall during a critical growth period. Eager to expand his customer base anyway, he took matters into his own hands. Cash-strapped but creative entrepreneurs can learn how to stretch an operating budget; unearth little-known credit programs; and, as Johnson and chocolatier D'Aquanni have proved, make a major purchase without even a down payment. Says McCabe: "If there's a will, there's a way. There are a lot of businesses that were not founded by going in and getting a big loan."

GET WHAT YOU CAN

From buying used equipment to enticing customers to pay early, the ability to barter and bootstrap your way to savings may mean the difference between your company's survival and its downfall.

"Making yourself open to creating relationships with a variety of possible resource holders is not a bad strategy," explains Michael Stouder, assistant professor of strategy and entrepreneurship at the University of Michigan at Flint. For instance, a lawn-care service in need of storage may strike a deal with a warehouse in return for cutting its grass. Business owners, Stouder says, are limited only by their imaginations and their negotiating skills. "It's not a matter of writing contracts with faceless organizations; entrepreneurship is a relational activity," he adds.

Extend creative deal-making to your customers. Demand payment in advance and offer incentives, such as free delivery, to persuade clients to settle accounts early. Some entrepreneurs, in contrast, delay paying suppliers and creditors. "People push it right into the collections department before it goes into delinquency to get as much mileage out of it as they can," says Stouder. "If they were doing everything on the up and up, they might not survive."

MONEY MAKEOVER

John Acosta (above) is in a financial rut. He needs $100,000 to upgrade his product, a garage door opener for motorcyclists, but the financing community has given him a cool response.

Washington, DC, attorney Andrew Sherman acknowledges that Acosta, who has sold $50,000 worth of his product but lacks a major distribution outlet, has his work cut out for him. But he does have options. A home equity line is a start, Sherman says, "especially at today's rates "A partnership with a garage door, motorcycle or home products company is another option. "He has to do some digging to find out who the contact person would be at those companies," says Sherman, author of Raising Capital (Kiplinger Books).