(Creative) Business Financing Questions?

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LandfillLumber

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warren, michigan, USA.
Wondering if anyone has advice as to finding creative business financing,I mean "creative" I know all about loans from banks(they won't touch a self employed person like me).I thought I could build this company from the ground up,but finding it harder then I thought to get to the place I need to be(better equiped/with better marketing).Ant ifo. would be great thanks,Victor
 
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Have you tried working with S.C.O.R.E (http://www.score.org). They are run by retired businessmen and woman. They don't provide financing, but they are expert at helping you get in place what you need to have the best chance of securing financing. All free of charge.
 
Business Plan

SCORE is great help....the first thing you want to do is develop a business plan. Banks will make loans but you need to have a plan to show how the business will pay it back.
 
Works in every state but one "TEXAS". All home equity loans can only be for home improvement. I owned two homes in Texas both free and clear and could not borrow on them for business, had to sell one, but the good thing was I didn't have to worry about making payments out of the business.

ed4copies said:
Home equity line of credit.

Don't fail, your house is "on the line".
Click to expand...
 
Seek out your local Economic Development corporation The should be able to guide you as well.
A Business Plan is a MAJOR need. Your not getting any money anywhere with out.
 
Many years ago a banker told me, "We WANT you to have everything you own on the line---if you don't believe you will succeed, why should we??"

So, I started understanding the attitude, "Put up or.....(work for someone else who WILL put up!!)":biggrin::biggrin::biggrin:
 
A google search quickly produced this:
Orman estimated her liquid net worth at about $25 million, ... 'Suze is investing as if she was a retired grandmother with no heirs.' ...

If you HAVE 25million, it is pretty easy to GET a loan.

Any time you don't need money is the BEST time to approach a bank to borrow. I love all these "financial gurus" on TV---they tell YOU how to live frugally, while THEY haul in millions. BTW, her advice IS sound, generally. Just not relevant to real banks and real money.

There you go, ASK Suze for the money!!!
 
Different strokes

OKLAHOMAN said:
Works in every state but one "TEXAS". All home equity loans can only be for home improvement. I owned two homes in Texas both free and clear and could not borrow on them for business, had to sell one, but the good thing was I didn't have to worry about making payments out of the business.

ed4copies said:
Home equity line of credit.

Don't fail, your house is "on the line".
Click to expand...
Click to expand...

How different things can be....In the late 80's, I went to the bank to get money on my house...they asked what do you want the money for....I said in essence "what do you care, I have a good job, an excellent credit record and 20 year payment history with your bank - you know it's a good loan" They wrote me a check.

Now it was a small town bank that I was doing business with and was on a first name basis with everyone from the tellers to the loan officer to the bank president and knew most of the stockholders as well.
 
LandfillLumber said:
Wondering if anyone has advice as to finding creative business financing,I mean "creative" I know all about loans from banks(they won't touch a self employed person like me).I thought I could build this company from the ground up,but finding it harder then I thought to get to the place I need to be(better equiped/with better marketing).Ant ifo. would be great thanks,Victor
Click to expand...

I finance for a living, but not in this specialty. Email me so I can be a bit nosy and give you some real information that may be of help.

The local SCORE, as suggested, or other business incubators are all excellent ideas to explore. However, my world of finance goes a bit deeper and can give you some hints for other places to start checking out.

Alan
 
Finance

There are places other than banks...I gave (and received) a couple of private loans for various purposes. But, at interest rates somewhat higher than bank rates. There is private money out there looking to be invested (and not necessarily from loan sharks) in a small town near where I lived there was an individual who had money invested in half the businesses in town he was usually about double the bank rates but not nearly as bad as the credit cards.
 
ed4copies said:
A google search quickly produced this:
Orman estimated her liquid net worth at about $25 million, ... 'Suze is investing as if she was a retired grandmother with no heirs.' ...

If you HAVE 25million, it is pretty easy to GET a loan.

Any time you don't need money is the BEST time to approach a bank to borrow. I love all these "financial gurus" on TV---they tell YOU how to live frugally, while THEY haul in millions. BTW, her advice IS sound, generally. Just not relevant to real banks and real money.

There you go, ASK Suze for the money!!!
Click to expand...

If you have 25 million, you don't need to get a lone, you can MAKE them instead! Wish I was in that position...
 
Ok, Victor. Here is some real advice.

Every place in America has a SBDC within 50 miles of their home (it's a law). Write down, on even a grocery bag, what it is that you plan to do. Take it to the SBDC. They will review it, make you attend a 4 night workshop ( it's not free, but upon successful completion, they will refund your tuition),

After that course, not only will you know how to write a business plan, you'll know who and where to go to make application for a small business loan. Additionally, you will know how to apply for the "secret" business grants available for small business start up, if you should apply for minority assistance and how to jump throughout "all the hoops"

Better hurry! The Gov't would like for you to believe that these opportunities don't exist, because they are quietly trying to "defund" all of these small business inventatives.

Go to your nearest community college and DO NOT LEAVE until you speak with someone who handles small business development. Dealing with BOTH Fed and State Goverernt ( How SBDC is funded is a royal pain! BUT, make someone prove the funding is not there). They ate betting that you will go away.....Don't!
 
ok, if we are going to be serious, GETTING the loan is only the start. Then, every month you will have to prove you still deserve the money. That means monthly financial statements and you need to understand them, better than the person you are talking with. (Usually a banker, sometimes a government employee) Any time they "feel uncomfortable" about the loan, they can unilaterally change the conditions---you are dealing in a "business to business" world, NO CONSUMER LAWS apply. You are NOT protected in any way.

Also, you will have to make out the monthly and quarterly reports to the state, and federal governments. In short, there are many good reasons why few businesses survive the first two years.

Stay small, Victor. Keep your overhead low and keep trying to improve your sales. Once the "top line" (Gross income) grows above "subsistance" level, THEN consider your next moves. "Spending money" to make money will work only in high margin, high ticket or high volume arenas.

Products for penturners is NONE of the above.
 
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Another thing you should do Victor.
Put all your tools not in the ownership of "LandfillLumber"... Document all tools with picture and noting serial numbers. and make all possessions that you use on Lease from you human Victor, to Business Victor.
 
Holz Mechaniker said:
Another thing you should do Victor.
Put all your tools not in the ownership of "LandfillLumber"... Document all tools with picture and noting serial numbers. and make all possessions that you use on Lease from you human Victor, to Business Victor.
Click to expand...

This is NOT BAD advice, but it does create a new form you will have to use whien you file your federal and state income taxes. Of course, it also does not qualify for your self-employment FICA, so it will not add to your Social Security qualified income, for retirement purposes.

But, I'm sure you were aware of all that, just thought I'd remind you.

Oh, and it MAY be treated differently by the state, than it is by the Fed, so don't forget the "adjustments to federal income" page on your state return.
 
Cash Flow

Cash Flow, actually lack thereof, is the most likely culprit in the demise of many small business startups. Ed gave you sound advice grow slowly with funds generated by the business. When you don't need every penny the business takes in, is the time to start thinking about borrowing.

Most small businesses borrow heavy at the front end to buy things to use in the business and then find that they can't generate the cash flow to pay for them and keep the shelves stocked. Loans must be paid for from Profits that are not needed to keep the cash flowing. Never forget that.
 
Why?

ed4copies said:
Holz Mechaniker said:
Another thing you should do Victor.
Put all your tools not in the ownership of "LandfillLumber"... Document all tools with picture and noting serial numbers. and make all possessions that you use on Lease from you human Victor, to Business Victor.
Click to expand...

This is NOT BAD advice, but it does create a new form you will have to use whien you file your federal and state income taxes. Of course, it also does not qualify for your self-employment FICA, so it will not add to your Social Security qualified income, for retirement purposes.

But, I'm sure you were aware of all that, just thought I'd remind you.

Oh, and it MAY be treated differently by the state, than it is by the Fed, so don't forget the "adjustments to federal income" page on your state return.
Click to expand...

I have never quite understood the reasoning behind that? Particularily if the business is incorporated I would think you would want to own in the business. Depreciation subtracts from profits as well as lease payments.
 
If you need more money to get more cash, I'd get a part time job and then you will have cash to infuse into your business. Cash is king. I pay cash for everything. Some things take me months or even years to purchase by simply saving and saving. If something happens to me, or the business, everything is paid for, so you can close the doors and lose nothing. It's a tough road to haul, but I'd have it no other way. The hours you lose by working for someone else, simply have to be made up by working longer hours, getting up earlier in the morning or working later at night.
 
Smitty37 said:
ed4copies said:
Holz Mechaniker said:
Another thing you should do Victor.
Put all your tools not in the ownership of "LandfillLumber"... Document all tools with picture and noting serial numbers. and make all possessions that you use on Lease from you human Victor, to Business Victor.
Click to expand...

This is NOT BAD advice, but it does create a new form you will have to use whien you file your federal and state income taxes. Of course, it also does not qualify for your self-employment FICA, so it will not add to your Social Security qualified income, for retirement purposes.

But, I'm sure you were aware of all that, just thought I'd remind you.

Oh, and it MAY be treated differently by the state, than it is by the Fed, so don't forget the "adjustments to federal income" page on your state return.
Click to expand...

I have never quite understood the reasoning behind that? Particularily if the business is incorporated I would think you would want to own in the business. Depreciation subtracts from profits as well as lease payments.
Click to expand...


Basically Smitty, since majority of any kind of business will fail inside 5 years. This tactic is best when starting up. Now Granted NO ONE here wants to see anyone fail in the wood business. After this time period then Yes have the business own these items.

Yet What is the Wisest thing to do Victor,
Write the Business Plan. Sit down with a Lawyer, and An Accountant to see what is the best course of action. Small Business Administration in Michigan As well as the Fed Government Websites can be very useful.
 
More good advice, especially from Ed and Smitty, both running small businesses that obviously are growing.

Something to do when about town is ask you barber, plumber friend, dentist etc where they borrow for smaller capital items. This will build your relationships and references, as well as perhaps get you an avenue to potentially borrow from besides the banks.
 
The day you borrow money is the day you no longer own your business. The only reason you would resort to loans is if you have a contract to guarantee sales which means the money will be repaid fast.

Business plan, you need that regardless.
To make plan you need ideas and goals.
Obvious goal is success. Real goal is to identify a void in market you can fill rather than compete with existing established businesses. Find those needs and ideas and work twice as hard as most. Your busines must grow itselfn not be forced with cash injection
 
One creative idea: if you have some personal/family savings (and SWMBO agrees), loan yourself the money from household funds to the business. Just be sure you have the discipline to pay it back on a fixed plan.

Just make sure it's an amount the household can afford! You don't want your family to get stuck in a tight spot if you need the money before the business has paid it back.
 
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