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Small Business Ideas Forum

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Old 20th September 2012, 08:55 PM   #1

Join Date: Sep 2012
Posts: 4
Default Need Help Deciding On Funding Options, Bank Or Other?

Hello Everyone,

This is my first post here, nice site.

My question is about funding for my business, whether I should go to the bank or seek other options. My business history is below.

I started the business 9.5 years ago. I developed a line of products in which my company manufactures using CNC equipment, mills, lathes, welders ect. The products are marketed and sold as our business name, we have distributors and direct customer contact.

My gross sales last year were 2.2 million, profit right now is very low still. During peek season my receivables can be a $100-$150K. I have 27 employees right now and our product line is doing great, we are having trouble keeping up with the demand. Everything is made in our facility, 0.01% is outsourced.

The problem is money goes out as fast as it comes in. In order to increase my profit and cut my cost I need a few pieces of newer equipment. Some of the machinery we are currently using is working but is not the exact equipment we need, so although it is working the correct equipment would manufacture items in some cases 4-5 times faster. I would also same money in material and tooling with this new equipment.

Also like many businesses cash flow is an issue. If we can increase our manufacturing quantities we could also increase our profit. However in order to manufacture larger runs I would need the money to purchase more material up front which I am having trouble with. Running small batches just to fill orders isn't building any extra inventory and is costing more than running a larger run, more set up times, paperwork. Also I would like to take advantage of purchasing bigger qualities of material to receive discounts on it. Also many companies that we purchase sub-components from offer free freight or extra discounts on larger orders, we could purchase ahead we could save there as well. Companies we pay in 30 days offer 2% net 10 days which is another advantage I feel.

Basically I am looking for a few pieces equipment totaling $100,000 and around a $100,000 LOC. Is this something I should go through my bank? (Which I have discussed it with them) or is there other options out there for me?

My personal credit is good with a 700 score, all equipment I currently own is all paid for with no liens. The only problem I am running into is taxes, my 2011 are not completed yet and I have nothing for 2012. My accountant is a excellent account but has become too busy to handle my stuff. I am having an awful time seeking a new accountant. I know I need stuff to do anything.

Thanks for any input.

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Old 24th September 2012, 11:57 AM   #2

Join Date: Jun 2011
Location: San Diego
Posts: 77


Have you looked in to leasing the equipment? Even if the manufacturers don't offer it, there are companies that will buy any business equipment and lease it to you.

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Old 24th September 2012, 04:04 PM   #3

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Originally Posted by jgbreeden View Post
Have you looked in to leasing the equipment? Even if the manufacturers don't offer it, there are companies that will buy any business equipment and lease it to you.
Thanks for the reply. Yes I have. I haven't done a lot of research on it yet though.

I know a lease doesn't show up as a debt, which I like.

What are the disadvantages of leasing. What type of paper work would most companies need to look at a lease?

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Old 26th September 2012, 11:13 AM   #4

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Location: San Diego
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Similar paperwork to a loan. The leasing company will look at it as a secured loan.

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Old 1st October 2012, 12:21 AM   #5

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Posts: 40

Originally Posted by jgbreeden View Post
Similar paperwork to a loan. The leasing company will look at it as a secured loan.
Yeah this would be better.

Accounting Solutions, Essex
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Old 18th October 2012, 01:35 PM   #6
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Join Date: Oct 2012
Location: New York
Posts: 1

Hi Fantanos,

Welcome to the forum!

Trouble keeping up with demand is a great problem to have.

Have you looked at non-bank lending solutions? mainstreetbusinessloans.com provides loans to businesses based on bank account cash flow, tax returns aren’t even requested in most situations. In addition, approvals occur much quicker than through a bank. Approvals with Main Street Business Loans are usually made within 24 hours, and funds within 7-10 days – so you can be well on your way to purchasing the equipment that you need – sooner than you may think.

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Old 30th October 2012, 11:40 AM   #7
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You have several issues all at once.
First, you have to get your costs under control if you want any type of business loan or BLOC. $2.2 million in sales and no profit - you are wasting money somewhere and just taking on new debt will do nothing but make your business spiral down quicker. Far too many companies in the world face what you are facing and essentially grow themselves broke.
Get your costs in line before you do anything else - I can guarantee that you have at least $100K in waste that you can pull back right now.
If your are burning through that much cash and have little or no profits, a bank is not going to provide you a LOC. But, you can also use your invoices to get an Accounts Receivable LOC - there are many companies that can and will provide this.
For equipment - leases have been mentioned - leases can benefit you with lower monthly payments and tend to be easier to secure. But, again, with your cash burn they still might be hard to get.
For inventory or raw materials needed - why not ask your suppliers for trade credit or more time until you have to pay. If they give you ten days now - ask for 30 days or more or tell them you will take you business elsewhere. They want your business and will provide you better terms. This way, no loans, no interest and you have time to convert those materials into cash before you have to pay.
If that does not work, have you looked into Purchase Order Financing - they will pay 100% of your purchase orders so that you can buy materials and hire labor to complete those jobs.
But, as stated, get your costs in order now and you might not need financing - if you don't you might just break yourself. At $2.2 million in sales - you should not have the struggles you have right now.

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Old 18th December 2012, 09:54 AM   #8

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Location: New York, NY
Posts: 18


I'd agree with checking out purchase order financing. There are a couple options out there (things like Receivables Exchange). On top of that an SBA loan might be right up your alley if you can make it through their process.

As others have said, with that kind of cash flow your profit margins sound like they should be higher (knowing next to nothing about your business besides having been a welder in a former life). If it is really just a matter of scale and you don't like the idea of a loan (or have a hard time getting one) you may be able to find an investor or two out there willing to buy a piece of the business in exchange for a profits interest. Note: This money would go to the business, not to you, so it could be used to really jumpstart your growth.

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Old 18th December 2012, 07:53 PM   #9
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Default Goldmine

OK, I've had the priveledge of doing the books for two metal fabricators in recent years as a CPA. I'm telling you that you are NOT charging enough. Their margins are well in excess of 60%. I was floored, almost literally by the dollar amounts. So I would tell you two things.

First off, the bank is absolutly the best way to go. Your accountant should be holding your hand in all of this. You are in one of the best industries out there. Since you've been in business for 9 years, what the hell is he doing to help you. You should be clearing $200k per year NET bottom line. Something is wrong. You are way beneath the industry standard.

You need two things, a 'Review' done by a CPA and a formal plan of attack as to why you want the funds. Dude, you should be really well off with no problems whatsoever. Your accountant should be Mr. INVOLVED in this as you should be doing significantly better.

If you so desire, contact me via [email protected].

I can help.


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Old 20th December 2012, 03:42 AM   #10
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I think you should go for Bank for funding & finance your business.Otherwise you can go for online mode also.But initially go for bank.

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