Like many bootstrapped businesses, one of the biggest challenges ZinePak faced in our early days was cash flow. My co-founder Kim Kaupe and I financed the company from our own savings and quickly became pros at shifting balances across multiple personal credit cards — sometimes as many as six cards at a time!
We made the decision to keep 100 percent of our company’s equity for as long as possible to maintain creative control. So, we had to look for alternative methods to finance growth. Manufacturing is a major part of ZinePak’s business, so we needed the spending power to make six-figure purchases in any given month to buy raw materials and production supplies.
‘Charging’ Forward in Business
We quickly became frustrated with the process of applying for business credit cards. Although we both had excellent personal credit, we were young and our business was unproven. In the first year, no credit card company offered us more than a $10,000 spending limit. Then one day, someone suggested we apply for a charge card. I had always, erroneously, assumed charge cards and credit cards were the same thing. It turns out they are very different.
“We quickly became frustrated with the process of applying for business credit cards. Although we both had excellent personal credit, we were young and our business was unproven.”
Unlike a credit card, charge cards offer much higher lines of credit that must be paid back in a shorter period of time. For our purposes, this was essentially like an advance on payment from vendors, or a short-term line of credit.
Our first charge card was instrumental in helping us grow our business. Our initial spending limit was around $60,000. Where we had previously been handicapped by our small initial investment, waiting for a client to pay us for Project A before moving on to Project B, we could now afford to work on three or four times as many projects simultaneously.
Something as simple as the introduction of a charge card was truly transformative for our business. We grew 350 percent in less than a year. Plus, paying vendors via charge cards, instead of cash, is advantageous because of the rewards. In our first year using the card, we charged more than $1.5 million, which we cashed in for great rewards like travel, office equipment and gift cards.
Three years later, we still put nearly every dollar we spend on charge cards, ranging from rent to office supplies. Without these tools, I’m confident we would not have been able to grow to our current size without taking on outside capital.
Other Funding Alternatives
In addition to charge cards, there are a lot of ways to finance your startup without diluting equity. One option is using loans or lines of credit. Most banks have programs designed to help small businesses grow. Many of these lending programs are backed by the SBA. Your business (or personal) banker can easily point you in the right direction.
Crowdfunding is another alternative to consider. The beauty of crowdfunding is that it helps your audience feel much more engaged with your company and gives you an enormous pool of consumer information to tap into. It’s a great way to finance expansion and get customer feedback at the same time. Although crowdfunding isn’t typically a sustainable model long-term, it can be a great way to help boost cash flow and finance a project or idea.
Do your homework before giving up shares of your company because few things in life are as difficult (and expensive) to get back. Whether you opt for a charge card, line of credit, crowdfunding, or another non-equity alternative, these options can be game-changing for your company without removing you from the driver’s seat.
This article has been edited and condensed.
Brittany Hodak is the co-founder of ZinePak, a custom publication company that creates fan packages for entertainers, brands, and athletes. She holds an M.S. in Marketing from CUNY Baruch’s Zicklin School of Business and a B.A in Public Relations from the University of Central Arkansas. In 2010, she was named to Billboard’s 30 Under 30 List. More recently, she and her co-founder Kim Kaupe were named to Advertising Age’s 2013 40 Under 40 List. Connect with @@ZinePak on Twitter.
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