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5 Replies Last post: Mar 6, 2008 4:00 AM by carson

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Start Up Business Loans

Mar 4, 2008 4:54 PM

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Michael925 3 posts since
Jan 11, 2008

Hello Everyone. I am in the New Venture Training through the SBDC ( http://www.contracostasbdc.com/ ) And I'm trying to figure out where I'm gonna get the money to start my business. My Business is gonna be a Plumbing & Heating Company that does Service and Construction. I am about half way through my business plan ( will be done in about 4 weeks ). Now here's my situation, I am a young man ( 27 ) who doesn't have much money, I do not own a home or anything that a bank would want. Where should I try to get the money to start the business. I would like to get around $100K but I could get started with only $50K. I have been looking into the SBA for loans but I don't have much to give and have no equity. I was hoping it would help to get the loan that I just moved back into my parents house ( no rent, no food, 100% free living ) and I'm about to get rid of my car payment, than I'm debt free besides Credit Cards ( owe maybe a $100 total, but i never use them ). I do not want to go to the family for money ( family doesn't have much money ). I have been looking on Craigslist.com lately just to see what's on there and I see allot about corporate lines of credit, I guess how it works is you buy a shelved corporation off them and it already has established D&B accounts and has great credit etc. Than you could get a loan for up to $500K to start your business. Does this sound legit to you guys or have you heard about this. To me it sounds to good to be true, especially since they want me to give them $20k for the corporation, than I get the loan. Any thoughts You guys ? ? ?

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Lighthouse24 2,396 posts since
Oct 10, 2007

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1. Re: Start Up Business Loans Mar 4, 2008 6:00 PM

You can see an earlier (related) post I made here:

http://smallbusinessonlinecommunity.bankofamerica.com/thread.jspa?messageID=11820&#11820

As noted, what this process generally provides is a line of credit. A $100K commercial line of credit is a different deal than a $100K business loan. A line of credit has a much shorter duration than a business loan (and since the amount must be repaid sooner, the amount that must be paid back each month is substantially higher). In general, the interest rate and terms you get on a line of credit are largely based on the value of your company (the less the company is actually worth, the more you can expect to pay in fees and interest). Also, as with your personal credit card purchases, the more of the available credit line you use, the higher the minimum amount you have to pay back each month becomes.

A credit line is still a terrific tool to have -- for instance when you need to buy materials for big job and you know you'll have the money coming in to pay for them, but you don't have the money yet. It's not usually such a great tool for capitalizing a small business at start-up, because most new businesses can't generate the revenue right out of the gate that they'd need to pay down the credit used initially (keep in mind that you'd be $20K or so in the hole after you get the shelf company, so if you used another $50K to launch the business, you'd have a fee, payment, and interest due on $70K a month later -- and you may not even have customers yet). In other words, you can get into deep debt fast.

Hope that helps address your question. Best wishes.

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carson 19 posts since
Mar 5, 2008

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2. Re: Start Up Business Loans Mar 5, 2008 4:08 AM

Are there ways by which i can be convinced of getting a good investment deal if i invest in your business,i want us to have discussion on this,also will you be willing to provide me with needed informations regards your company so i could make investment move?do send me a positive email to doncarson7@gmail.com

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Michael925 3 posts since
Jan 11, 2008

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3. Re: Start Up Business Loans Mar 5, 2008 9:09 AM

in response to: Lighthouse24

So Lighthouse, do you think my best bet would be to just get a business loan, Also if I do go with a loan, should I just stick with the SBA loan programs ( my school recomends them ) or are there ways I should look into ?

Carson, I havent really looked into inverstors but my understanding of inversors is they give you the money to start you business but they also own a part of your business. I am 100 % sure that my business is gonna take off so I really dont want any one but me owning the business. Please correct me if I am incorrect in any way though !

Thanks For The Help !

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Lighthouse24 2,396 posts since
Oct 10, 2007

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4. Re: Start Up Business Loans Mar 5, 2008 1:44 PM

in response to: Michael925

A loan is good if you can get one. The "best" source of funds for a new start-up is the owner's savings and money invested by his/her family and friends -- that's how more than 80 percent of new businesses get their start every year. If you can't raise ample funding that way, your next best option may be to partner with someone who can "bring something to the table" that you can't.

Let's assume that what you are bringing to the table is the business concept, technical skills, and the applicable qualifications/licenses for the plumbing/heating trade. A partner may be able to bring management, marketing, and administrative experience to the table that you lack -- and of course, the money that you don't have.

Sure, it's possible that if you could come up with $50K on your own, you could have a $200K business in the three years -- but if you can't come up with the money to get started, you'll have nothing.

The right partner may provide not only the $50K start-up cost, he/she may also offer skills and ideas that turn it into $300K business in three years. And chances are, the right partner hasn't had a lifelong hankerin' to co-own and run a plumbing and heating firm -- he/she just recognizes a good investment opportunity, and would happily take the $150K and give you back full ownership. In that case, you'd end up in exactly the same position as if you provided all the start-up money and took all of the initial risk yourself.

The reality is, the larger the business you're trying to launch, the more resources you'll need to ensure its success. Unless you have all those resources yourself, your choices may be limited. Would you rather have 50 percent of something great, or 100 percent of nothing at all? I don't know Carson, so I'm not saying that individual is necessarily the right partner for you -- just saying that you may need to at least consider an outside investor or partner if you want to launch your business anytime soon.

Best wishes.

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carson 19 posts since
Mar 5, 2008

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5. Re: Start Up Business Loans Mar 6, 2008 4:00 AM

in response to: Michael925

Hi Michael,investing in your business will not make me want to own part of your business,if i am conviced of your business and its profitable potentials and also we agree on a ratio regards the refunds on investment,i will only make sure that i direct most of my efforts to ensure that i do not only invest in your business but also see that the business grows to our expectations.i do want you to send in details of your business to me so as to know if we can start something. send mail to doncarson7@gmail.com

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