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Business Loan

Discussion in 'Business Operations' started by CWilliams, May 27, 2005.

  1. CWilliams

    CWilliams LawnSite Member
    Posts: 60

    How many of you all started your business with a loan from a bank or other lending institution?

    This is our first year and we have received a contract that will pay $75,000 over the next 3 years (beginning July 1st). We currently have residential accounts that gross $1700 per month. My husband lost his job this week and really wants to mow full time, but the cash flow just isn't there yet. At this point I'm considering a business loan, but I really don't know what the lenders require. Our entire business is financed based on our personal credit (loans for equipment and credit card cash advances - bad idea, I know). I would love to borrow enough money to get us through this season and the winter. We got a late start obtaining commercial properties this year and I really think next year will be awesome.

    I'd love to hear your thoughts along with the requirements of lenders.

  2. MMLawn

    MMLawn LawnSite Gold Member
    Posts: 3,569

    Being basically a brand new business with no track history and only $1700.00 a month in receivables and with no money in the bank from the business and with other already outstanding credit ob's on this business using credit cards and the fact that he lost his salary from his "real" job even with a new $25K a year commercial (which the bank knows can disappear as fast as it appeared even with a contract) you'll be very,very hard pressed to find a bank to do a business loan.

    As to their requirements, at the min they will require at least 2 years worth of strong P&L Statements from the business that will show that the business is financially sound and can repay the loan, 2 years worth of strong business checking acct activity, business assets that exceed the amount being requested, lienable property to secure the loan, proabably no more than a 40% current salary/debt reo, a personal guarantee if the business is a INC or LLC, and of course outstanding credit.
  3. Team Gopher

    Team Gopher LawnSite Platinum Member
    from -
    Posts: 4,041

    <marquee loop="infinite" bgcolor="#DDDDDF"><font color="#000000">Have a tax question? Ask our CPA. Click Here </font></marquee>
    Hi CWilliams,

    Please be very careful with getting loans. I am very happy to hear about your contract, what happens if they pull out of it? If their company goes under? etc.. I would hate to see you stuck in a pile of debt. Is there any way else you could raise funding? Even with another part time job? Or other side services?
  4. J Hisch

    J Hisch LawnSite Senior Member
    Posts: 952

    debt becasue of work you might keep is a very bad idea, is the equipment you currently have inadequate to take on this job? One of the first things you might consider how much debt do you already have? It is also not wise to try to live on credit while building a business. I would feel safe to say that most on this site are self vested. Meaning they put in their blood, sweat, tears untill they could afford to go full time. Personally, if it were me, I would see if it would be possible to work a second shift job, do the work you have now and use the daytime to sell, sell, sell not having a cushion often is the best way to survive. best of luck.
  5. Nebraska

    Nebraska LawnSite Senior Member
    Posts: 525

    We started with a loan in 1997. Take some risk or you'll never know. What do you have to loose? Really.....if it doesn't work out where will you be?
  6. pagefault

    pagefault LawnSite Senior Member
    Posts: 492

    Go to http://www.sba.gov. There are a lot of loan programs there. You will need to find a lender that has SBA experience. Typically, you can get about $2 for every $1 you put up. Your equipment might qualify as collateral, but probably at a substantially reduced value. You will need to have a business plan, you should have good credit and you may need to put your house up as collateral. Anyone who owns more than 20% of the business will have to personally guarantee the loan.
  7. topsites

    topsites LawnSite Fanatic
    Posts: 21,653

    As a solo LCO ...

    No loan, saved cash for many years, paid off credit cards, paid off car, paid everything off and started out with NO debt thou I should've saved more like 10 or 20k. I had 5k, wasn't quite enough.

    In my 2nd year I got a business visa - I keep it paid off every month, but catch about 10 bucks/year in interest fees (not sure exactly how, hehe).

    This is my 4th year and the first time I got an actual loan (tiny one) and I'm nervous as hell about paying off 2800 lousy bucks for 12-mos same as cash.

    No the whole thing about loans leaves me cold, it reduces the value of my dollar and I end up losing hundreds (and thousands) of dollars over the years in interest. Loans = The sickness that afflicts the poor.
  8. MMLawn

    MMLawn LawnSite Gold Member
    Posts: 3,569

    BANKRUPT!!! :dizzy:
  9. Lawn Sharks

    Lawn Sharks LawnSite Senior Member
    Posts: 394

    Your cash flow and credit history are red flags to a bank and the chances of getting a loan are slim.

    If I were you I would be hitting the streets to get enough accounts to get by.
  10. Nebraska

    Nebraska LawnSite Senior Member
    Posts: 525

    To sustain substantial and rapid growth there has to be a source of capital.

    Most can't handle the risk associated with using "other people's money" to build wealth and do not have the availability of an outside source of capital; be it private investors, family, or a traditional lending institution. The reasons could be a combination of their comfort level of risk, credit, contacts, etc. As such their growth is limited.

    In a situation where so much is dependant upon that one account, I personally would be leary having my success or failure depend upon that sole account. I think that most investors be they private, family, or a traditional lending institution will see it that way too.

    An option to pursue to address the issue of cash flow that will arise with bringing on that much of an increase would be a business line of credit rather than just a loan. A lending institution can set it up as a % of receivables so many days out that you can draw upon.

    The total revenue that is reported by CWiliams is in my estimation only $40k-$50k per year with the addition of the new account. As such he should be able to make it work with a line of credit in the area of $4-6k... He's really not talking about a large amount of money. That all of course is dependant upon the profit margins this work is being bid and performed. If you're loosing money on your work no amount of loan is going to turn that around, it will just merely postpone the inevitable.

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