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Thread: Business Contributions

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    Business Contributions

    I have ventured into a new business with three partners and being a new business has cash flow issues. We have all had to put money in from time to time, amounts dependent on shareholding.

    If I got to a point of not being able to contribute anymore, would I be forced to sell shares to the other partners in lieu of putting money in? Or are there other options?

    Any opinion would be appreciated.

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    Diamond Member Blurock's Avatar
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    Cash flow problems are endemic of new ventures as everything does not always work out as we have planned. Funding is however not easy to obtain. Depending on the type of business, you may consider factoring your invoices until such time that you are on a positive cash flow.

    Customers want credit for at least 30 days and by discounting the invoice, the bank/factoring house will pay you up to 70% or 80% of the invoice value, based on the credit standing of the creditor. This will allow you to purchase new stock/raw materials for the next sale.

    It is not advisable to keep funding losses/shortfalls if uncertain of a turnaround. Your shareholders agreement should indicate whether you have agreed on additional funding or whther your investment into the business was once-off.
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    Dave A (12-Jan-21)

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    Site Caretaker Dave A's Avatar
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    Great advice from Blurock above. Especially in terms of what your current "obligations" may be -

    Quote Originally Posted by Blurock View Post
    It is not advisable to keep funding losses/shortfalls if uncertain of a turnaround. Your shareholders agreement should indicate whether you have agreed on additional funding or whther your investment into the business was once-off.

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    Thanks very much! Makes sense.

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