Money In The Mail


From original questioner:

Ive been transitioning my business away from field work and more into shop work for several years. Through this time Ive been cultivating contacts and (speculative) demand for shop work but with so much time outside the shop doing installs and other field work I seem like I can never break over the hump and have enough time to commit in house to cultivate the work that would (hopefully) allow me to either greatly reduce, or eliminate all together, the field work.

I feel like I am perpetually trying to get a buffer of several months in the bank where I can get out and beat feet on these leads, take orders that I can honestly commit to, and get the business off the ground in a different vein.

Im tired of the variables in the field and the headache of installs and would much rather stay in the shop working even if at a reduced margin for a period.

With that I feel like I would need three to six months worth of buffer to do that. It wouldnt be three to six months with zero income but it could be lean at times and in a perfect world during that time you would hopefully not be worrying about the finances and able to focus on the work. Of course every now an then the juicy job comes along where you think "this one may leave me with $XXXXX cash at the end" only to have it fall a bit short.

The cultivated work is, in my opinon, very solid however it is speculative and one never knows til' someone commits and signs the check.

To the subject line, my business is well established and in a very rural area. I am constantly getting offers in the mail for lines of credit which usually range in the 250K and up region. I have always been, what I felt was, very aware of these merely being high interest lending scams though I have never honestly called one of them or done any research to look at the terms.

For my own reasons I would much rather avoid a local bank given the rural area and I just dont like the "everybody knowing your business" factor. Its very common around here for there to be chatter with regards to how much business you do and how busy you are given that many locals work at the bank(s).

I received another one of these this week and they always get me thinking. I am in no way considering a large sum but perhaps something in the 20-30K range to compliment what I already have. Thinking it could be paid off in short order just as a means to get through the transition.

Too many variables but I feel like its time to **** or get off the pot.

From contributor ja

You can borrow Money anywhere these days. Used to be you A) went to Dad, B) went to the bank and C) you went to Guido (No insult to the Guido's intended) on the local Street corner. Only change these days is Guido is wearing many more hats and disguises

There are only three reasons people lend money A) a return on investment B) a tax advantage on investment and C) Love

Those offers are going to come with needs, they will want collateral or your first born (depending on Guido's needs). You can bet for sure you will give something. It's business.

I have used three methods to "Step up" used a lease to buy a really good new edgebander. Work increased hired employee paid off lease,,, edgebander helped increase income (we were much smaller then. took a really big job then went and found a bigger company to build most of it. got a fee for that the install fees and a portion of the build,, this step got us a really big step up in reputation and ability. later I took on a really large distribution center (one we all give money too) job was 140 k borrowed 70 at 10% for 90 days (it was recession money was tight) only actually needed 40 k and paid that loan off on first draw with work in place at 60 days. why was this such a good idea,,,, I got three more of these facilities from that GC and leapfrogged into large jobs with some real $$$ and with the trust I built the GC financed the jobs.

I was once told by my Old School CPA Uncle to think of your CPA, Banker and Lawyer as your Partners. you are getting Married to them so you better trust them. I have all three and treat them with the loyalty that I expect from them. we are are in this to make money together. I use a small local bank. I like the fact that my banker and I still talk two to three days a week (more when money is tight between front and back of jobs) he can fly me up a few bucks when needed and we keep our primary loans with him (mortage, cars equipment etc)

Sounds to me what you need is a credit line buffer, rethink the Banker you got good work he is going to see it, he will want to make money with you (if he is any good at his job) in a small bank 10-5 k worth of collateral and a good income source will get you a 25k line of credit.

The real key is know exactly how you will pay that money back before you borrow it. treat it like the best work you will ever do and pay it back

A lease or online line of credit will want their money hard and fast, it is a computer not a human it has no thoughts feelings nor emotions, it does not care.

otherwise there is always Dad and Guido !!

From contributor ja

Oh and if the local banker has a big mouth, go over to the next town and tell that banker why you are in his office, wait a few months once business is flyin and the banker in your town ask why you do not do business with him, then tell him the truth. that is the last information he will want on the street from a successful company

From contributor Q-

Thanks James,
Always good advice.

I have had no bank overhead for quite some time and I remember all too well the stress I have had the times when I have had it in the past. I am of course not operating at a level anywhere near your annual gross.

The problem I have with your information (and its not with you its my own) is:

"The real key is know exactly how you will pay that money back before you borrow it"

That is the issue thats probably causing me my own reservation. I would be heading down this path knowing full well there is some level of speculation involved.

I dont see how I could go out and secure purchase orders to cover the total of the loan. Your statement about a buffer credit line would be a bit more accurate. Basically a reserve of cash which is sitting there to be drawn against or paid off as needed as opposed to a fixed loan.

I guess if Im going to get off the pot its time to make some calls.

Thanks for helping me with this James, much appreciated.

From contributor Mi

Question for you: do you have a baseline of cultivation time assigned to give yourself some specific numbers of the cause/effect of what you plan to do? Start small but do something proactive that does push the pendulum in the direction you want. It may be easier or harder than you think.
To do this you have to say no to your least profitable deals. Do you know what those look like? What does the pains in your side jobs feel like and how can you get rid of them before getting sucked in to the impossible to please or barely break even if you're lucky.