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  #21  
Old 05-11-2003, 11:19 AM
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brucec32 brucec32 is offline
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Location: Atlanta, GA
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Quote:
Originally posted by PetalsandPines
Sounds like I need to get that book. I just don't feel that dealing with banks is a personal thing anymore. You may be friends with all the employees, heck a few are my customers also, but your information still gets sent downtown to a mainframe computer which assesses your credit score. Most of the time businesses have scratches and dents on their credit reports because they are desperate for financing, when lending institutions realize that, they only give you enough to get by, or hit you with ridiculous finance charges such as the 27% interest lease I am paying on my Turf Tiger, By the way thank you Scag & your financing partners for denying me on that one!
You're right. It's not a personal thing anymore. Welcome to the new economy where everyone is from somewhere else, nobody knows anybody, and your neighborhood bank got bought out by a bigger one who doesn't know you at all.

But you've answered your own question. "Scratches and Dents" in your credit report and being "desperate for financing" is possibly why you're having problems. Not necessarily redlining. The number one reason small businesses fail in America is cash flow. You can actually be profitable and fail because you don't have the cash to cover your current costs. The banks don't want to lend money if they risk getting it back. Think how small their margins are. They borrow at 4% and lend it at maybe 8%. That's 4%. So if they lose 100% of their investment with a lawncare company, they have to make 25 PROFITABLE loans just to break even. So they have established very strict underwriting standards and formulas to make sure that doesn't happen. Only those with near perfect numbers will get their loans now that they've been burned by the recent past. Anyone who is "desperate" or has to pay 27% to get financing on equipment loans in a environment when 0% financing is common, and the prime is around 4%, isn't going to be looked at as a stellar credit risk, even though you may know you can handle it.

Again, part of managing growth is allotting sufficient cash to handle short term costs. It's become common for people to be heavily leveraged, but not that long ago you were expected to have most of the cash you needed for expansion. From a conservative banker's financial outlook, if you're so profitable that you want to expand, you should be able to have enough profits left over to use to buy the equipment, and cover the short term cash problems yourself. Or at least mostly so.

Other sources of money:

Home equity line of credit - 4%
Home equity loan (different) ?
Borrow money on your personal assets if you own them outright, then use that cash in your business. (get a car loan if you don't have one, for example)
Credit cards with REASONABLE rates
Loans from relatives
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  #22  
Old 05-11-2003, 12:05 PM
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the scaper the scaper is offline
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on a different note (no pun intended) i've maintained personal properties for several higher level banking individuals and not all, but most, are some of the tightest, slowest paying people i've ever worked for. when borrowing money good credit is a must, however i cant help but to think that somewhere not to far behind behind the scenes is nothing but some good old fashioned greed
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  #23  
Old 05-11-2003, 01:09 PM
LLMSERVICE LLMSERVICE is offline
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Join Date: Oct 2002
Location: Thunder Bay, Ontario
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Here's what I did to let my banker know what I was doing.

I stopped by to till his garden yesterday as I had a number of them to do. Rather than just load the tiller and related items on the truck, I loaded the entire rig - trailer, Laser, mowers - everything!

I pulled up to his house, put the pylons around the truck, activated the roof lights and went to work. I invited him out to see what his money was paying for.

Now he can visualize what I've invested in and he has a better appreciation as to what it takes financially to be a professional looking outfit.
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  #24  
Old 05-11-2003, 01:13 PM
quiet quiet is offline
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Join Date: Jan 2003
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brucec32

your posts on this thread should be marked "must read". And not just for this business, but for anyone starting a business.

There are some veterans here that add immeasurably to this board; from the "in the field experiences" issues, to business acumen.

You're one of them.
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