Hello everyone. I am looking for some financial advice as this forum seems to be frequented by some very intelligent and experienced people. Sorry if I bore you but here is a little synopsis of my current situation:
I started my business in May '06. It is a Construction company, family owned and operated. The first year of the company was mostly setup and income was minimal. For 2007, a spec home as well as a few homes for customers and an addition were built and sold. Later in the year we entered into a lease-purchase contract on a building which we have renovated into a Modular Homes factory, certified through a Third Party Inspection agency. Everything was done with cash and now things are beginning to get a little bit tighter as we have expanded; the company owns real estate, construction equipment, as well as the equity and assets in the factory. We have decided we would like to operate more through Construction Loans or a LOC, rather than funding multiple jobs with cash. Seems it goes quick with housing. ;-)
After being turned down for a LOC and a couple loans, I am left to wonder if I should just resort to lending from a personal investor rather than a bank. The LOC ($100k) was applied for with a Blanket UCC with about $175,00 of collatoral (real estate, equipment, tools, etc.) and was turned down for lack of income ('06) and because the business is too new. When the Loans were applied for, preliminary P&L for 07 were supplied as we knew the 06 tax returns would not help and we do not have our returns for 07. We were then turned down due to my personal financial information. (I say "we" meaning the business and family, but I am the sole principle.) Being only 20, my tax returns for previous years showed a lack of income (one reason for being turned down) as well as being a new business. My credit score was ~775 last time I checked. I only have one credit card but signed personally for company equipment to gain credit from that as well.
The loans were applied for to help finish a job for a USDA home. USDA stopped doing construction loans so the job is being done cash. This is especially helpful for our sales as it opens the market to more buyers, but also puts somewhat of a strain on the company. Mortgage commitment, contracts, and deeds for the land (company owned) were all supplied when we applied for the loan. The modular home unit(completely paid for) is 95% finished ready to be shipped from the modular factory, and land is already owned in the company's name with a foundation on site.
With what seems to me, with my limited knowledge of the financial world, a great and very safe loan, I am left to wonder if showing little to no personal income is going to stop me from gaining anything from banks within the next year and a half. With over 75% of the job paid for and a currently successful company with assets and equity doing a decent amount of business (have multiple contracts signed for homes for customers with mortgage commitments), I hope someone can help me out or give me some discretion towards the right direction to take. Being slowed by dwindling cash numbers and frustrated with my "new business status" is a little discouraging and makes it tough to push through these types of jobs to closing.