If you're self-employed, starting your own small business or running a farm, you're going to run into a situation where you need extra money. You've landed a big job, for instance, but you have to buy a lot of material and you won't get paid until you finish the work. That's a cash flow bind and you have to somehow borrow against that future revenue.
A credit card is one way to borrow against your future revenue if you need money to buy material or hire workers now but won't be paid for several days or weeks. A credit card charge is essentially an unsecured loan. It pays your bill immediately and you'll typically have at least a month to get the revenue to pay it off. You can charge lumber for a project and then pay it off when you collect. It's a good way to borrow small amounts against money you know is coming in.
Contract or Purchase Order
If you've got a contract for a job, you can take that to your bank or lender to offer as collateral for a short-term loan. A firm order to buy your services or product with a guaranteed payment date will usually get you a short-term loan to finance your work with a promise of payment. You may be able to borrow only a percentage of the payment. A $1,000 painting contract will secure a short-term loan for all your paint.
Try to get a continuing line of credit. Approach your bank or other lender about creating a growth debt, a continuing source of credit that you can tap as you need. You'll need to provide some proof that you have continuing income from your work or product sales. This is different from a fixed-term loan because you borrow only what you need when you need it, have a flexible repayment schedule and pay interest only on what you've borrowed.
The federal Small Business Administration and some state governments have business development programs that will make temporary loans to help individuals or companies that need temporary financing. Another alternative is private investors. Some venture capitalists will make short-term loans to promising enterprises if they can see a future revenue stream.
Bob Haring has been a news writer and editor for more than 50 years, mostly with the Associated Press and then as executive editor of the Tulsa, Okla. "World." Since retiring he has written freelance stories and a weekly computer security column. Haring holds a Bachelor of Journalism from the University of Missouri.