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Raise Money When You Don’t Need It

Financial EfficiencyI recently got a call from an entrepreneur who wanted money that very same week in order to meet payroll. He also said he was willing to pay “any reasonable return” to get it.

This wasn’t exactly the sort of plea that inspires confidence. Though I could have commanded a serious rate, the guy didn’t get a cent from me.

See, financiers have this strange notion that they should get their money back, along with a reasonable risk-adjusted return. That’s why strong businesses have more financing options, enjoy lower interest rates and suffer fewer restrictions, while weaker ones go wanting.

This is completely intuitive, of course, and yet countless entrepreneurs make the same mistake: They go looking for money when they really need it instead of raising it–on far better terms–when they don’t.

This article originally appeared on Forbes.com.

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