Borrowing capital from family, friends, employees.
Charles Bodenstab likes to keep his revolving credit line at his bank as open as possible in case he needs it. So to meet his short-term cash requirements, Bodenstab, president of Battery & Tire Warehouse, in St. Paul, Minn., taps into a source closer to home: his children, friends, and employees. Lately, he has borrowed about $100,000 in this manner. The "commercial paper" is offered in $10,000 bites, and each month investors receive interest checks for 1% of their $10,000 investment.
Bodenstab says he's happy to pay his investors, who include three of his four children, an annual amount of $1,200. "That's about what my incremental borrowing cost is. And it keeps me from having to pay late fees to my vendors," he says. He gives investors letters acknowledging their investment. And if they need the money? "All they have to do is let me know. We pay them instantly." -- Bruce G. Posner