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    1 Reply Latest reply on Dec 8, 2013 1:19 PM by Uncle Leon

    help finding investors for a used car dealership

    joeyb620 Newbie

      I recently purchased a small used car business. The business
      was not in good shape when I took it over to say the least. In my first eight
      months I’ve really down well with getting it off the ground… I’ve taken it from
      less than 500k a year to a projected 2 million. Using my limited cash on hand
      and 50k floorplan

       

       

       

      So here is my question how can I attract investors? I’m in the process of
      renaming the business (new llc from a sole prop) and I’m looking to take it to
      the next level. In the first few months I really wanted to start small.. to
      give myself time to really refine what I’m doing before going to a larger
      scale. I was thinking of offering around 20% interest on cash investments. So
      far I’ve produced when it comes to small cash investments… close to 40% growth
      in a few months’ time. With the right backing I’m very sure I can continue
      this.

       

       

      Getting my business to the next level needs the right
      investors… with both the means and experience…. Now where do I find them? I’ve
      been told craigslist ad’s… however I’m pretty skeptical of being able to
      attract the right type of people. Has anyone had any experience good or bad
      doing it? Can suggest other avenues to explore

       

        • Re: help finding investors for a used car dealership
          Moderator Rebecca Guide

          Hi joeyb620, welcome to our forum!  You have definitely come to the right place to find out some more information on how to best attract investors.  You might be interested in reading a few of our previous topics where this has been discussed, as there are some very good ideas that our members have given.

           

          I'd recommend starting by reading this article by Inc. at  Be irresistible to investors: 3 steps, which should give you some really good ideas, as well as browsing our forums for other discussions surrounding what has worked for other members.

           

          I'm interested to see what our members have to say.  Good luck to you!

           

          -Rebecca

            • Re: help finding investors for a used car dealership
              Uncle Leon Tracker

              First, Joey; let me congratulate you on bothy your "new" business and on having a 50K floor plan.

              Just how much value a 50K floor plan is, depends upon the price level of vehicles you're handling.  For a normal BHPH lot, that would cover about 25 cars, which would, fairly quickly, become money "on the street".

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              One solution is to get outside "guaranteed financing" for your sales, so as to turn the cash quickly, back to you.  But, as I'm sure you know, that does cost you money in dealing with these lenders, plus the money you loose in the "interest" lost on a BHPH plan.

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              The 20% you arre offering (I assume you mean 20% / yr) would, on the surface, sound like you should be getting investors lining up to provide funding.  But considering that there is "risk" involved for the investor, multiplied by the reputation of dealing with a "used car dealer", makes acquiring this funding, more difficult.

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              Let me immediately follow up that statement saying that a "used car dealer" is simply another businessman...no more or less honest than any other businessman.  But, nevertheless, It's a reputation you're stuck with, when you enter this business.

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              I have provided financing for an operation like yours; and I can tell you, first hand,.... the the investor wants a bigger piece of the pie than 20% / year.....plus he wants safety.  At least in the beginning of such a relationship, the investor wants to hold the title, until the vehicle is sold, and he is re-paid.  After establishing a successful relationship, the investor will probably feel comfortable enough to forego that requirement.

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              Now...as to the 20% interest:  The funds provided can be "turned over" many times per year.  in a successful operation, possibly 10-12 times while buying, "prettying -up" and reselling 10-12 vehicles.  As an investor (greedy vermin that we are); we want a piece of each turnover.  If the investor is offered a percentage of the profit, he will probably be suspicious of whether the purchase, repair, and sales costs are underhandedly "inflated" in order to show less "profit".  Therefore, a good method IMHO is to pay the investor a lower percentage, but make it a percentage of the funds he has provided FOR EACH buy/sell deal.  Example: lets say the purchase price plus auction fee is 2,000, and repairs cost $500; you could make a good profit paying him 10% of the funds he provided (in this example, $250).  If the customer purchases on a BHPH, basis; pay the investor at least half of the interest received, for the time the money is "on the street".  (After all....it's the investor's money that is "on the street")  If the customer defaults and the car is recovered, repay any outstanding funds that are due to the lender, and start over again.

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              In summary, the investor wants to be an INVESTOR....not a lender.