When You Need Financing, Lower the Amount You Need to Borrow by Asking Clients for a Down Payment

 In Financing

Asking clients for a down payment will help lower the amount you need to borrow.

We’re all used to the idea that companies must get their products on the shelves in order to make sales and hence generate profits. But what if you could ask for a chunk of the cash before you even broke a sweat? It does happen. Automotive pioneer Henry Ford (founder of Ford Motor) did this with his network of car dealers. He asked all of them to commit to selling a certain number of cars in the forthcoming year and to pay for them ahead of time.

In simple terms, he got the cash long before he started to build the cars. It allowed Ford to stay in business without tapping the financial markets for cash. The story is detailed in The Path to Personal Power by Napoleon Hill. Although the book was originally written as a series of lessons in 1941, the message hasn’t aged. At a minimum business owners should consider asking for a down payment (perhaps the whole bill) on orders before beginning work for their customers.

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