Unlikely Sources of Capital

Entrepreneurs who run profitable businesses have told me that they regularly access capital apart from tapping bank credit lines, attracting angel investors, borrowing money from friends and family, and digging into their own personal wealth. In the past couple of years, their businesses have added new product lines, hired employees, expanded facilities, and experienced tremendous growth.

Being frugal frees cash to fund growth initiatives, and these owners have certainly exercised prudent spending. But there are creative and financially-savvy ways to build growth capital without the exhibiting Scrooge-like behavior, sacrificing quality, or shifting focus from purpose to cost-cutting programs. Unlikely sources of capital and substitutes for outside cash infusion that can support growth include: 

Using Research and Development by Outside Organizations

R&D performed by vendors and university labs, for example, can dramatically lower a business’s needs for capital to drive development of new products. Rather than spend on running a lab dedicated to research or software development, businesses can refine, repackage, and resell cutting-edge products using someone else’s ideas.

For example, Chuck Goad of BrookStone Technology leveraged the strength of a larger technology company that created electronic medical record (EMR) software. Chuck recognized growth potential in the healthcare industry, but he didn’t want to dedicate resources to the development, testing, and launch of EMR solutions. He partnered with a third-party developer and applied working capital to hiring a sales representative to build a local market for the solution.

Your business may be able to locate a research-oriented organization that needs a partner to identify and market commercial applications of its intellectual property.

Cloud Computing

Your business can pay a monthly fee for web-based systems and applications technology services rather than spend money for infrastructure and software design, development, maintenance, upgrades, security, and more.

Tax Deductions

Make sure that your business is tracking all qualifying deductions to lower taxes. Things likely to be forgotten are out-of-pocket expenses, so remember to hand those receipts to your accountant along with explanations of their business purposes.

Take a Section 179 deduction on purchases of qualifying property (e.g., equipment and furniture), rather than deducting depreciation charges over the next several years. Though depreciation more accurately spreads the cost of the equipment, furniture, etc. over its useful life, deducting the full cost of a purchase will reduce taxes now.

Credit Lines with Vendors and Grace Periods on Card Charges

Not having to pay immediately will allow your business to receive and use products or services for a specified period (very often, about 30 days) prior to invoice due dates. During this time, your business can distribute products or deliver projects using services supplied by vendors to generate sales and collect payments from customers. As a result, cash is available when invoices are due. Even if there is a lag between receipt of customer payments and invoice due dates, any credit extended by vendors or card companies can shorten the days that your business needs to borrow money or tie up its cash.

Faster Payments from Customers and Quicker Deposits to Your Bank Account

Speeding up these processes reduces the need for borrowing from a credit line so that your business can pay its employees and vendors. Consider online invoicing and accounts receivable management as a technique to get your money as quickly and efficiently as possible.

Sharing, Leasing, or Borrowing Equipment

Consider alternatives to outright purchases. Copiers, common-area refrigerators, and grounds maintenance equipment, for example, are candidates for renting, sharing with neighboring tenants, or borrowing from trusted colleagues.

Agile Inventory Management

This focuses resources on high-turn, fast-moving products rather than tying up cash in inventory. For example, purchasing agents at ValuePetSupplies.com place orders on a daily basis to ensure quick replenishment of inventory without overloading on merchandise.

If your business is adding new items, consider buying a small quantity and testing its appeal with your customers. This approach worked beautifully for Heidi Kallett of The Dandelion Patch in evaluating new price points of an existing product line. When the item sold quickly, she increased her stock levels.


Many would-be business owners have spoken with me about their eagerness to get bank funding or investor cash quickly in order to take advantage of (what they perceived to be) hot business opportunities. Even experienced business owners are often ready to make changes that require immediate cash outlays. Patience can yield financial benefits.

For example, when Heidi decided to update her company’s logo and its color scheme to reflect a premier brand, she didn’t rush to replace marketing collateral, redo the interiors of her stores, and redesign the website. Her company continued to use its logoed business cards, shopping bags, etc. but when supplies ran out, she replenished the collateral pieces with upgraded logos. She will update colors when it’s time to refresh the look of the stores and the website.

Zach Piech of ValuePetSupplies.com told me that having to delay the launch of a new product line can be frustrating but worth the wait financially. Instead of borrowing from a bank to bring in inventory, he generated capital from business profit margins. In one case, the need for extra funds solidified the decision to discontinue a low-margin product category with a high customer return rate in order to free cash for less problematic, higher-profit product lines.

Traditional sources of capital, such as bank financing or outside investing, may not be an option for many businesses. Deftly leveraging other people’s assets and being the best possible steward of your business’s assets can give you the resources to grow.

Disclaimer: The links and mentions on this site may be affiliate links. But they do not affect the actual opinions and recommendations of the authors.

Wise Bread is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to amazon.com.