Taking on an Investor?

[AshleyMckendree]

Not talking about adding a partner(never ever), but rather an Investor.

The landlord/owner of my shop is a well-to-do man, who I have been doing business with for years, both of us going in on vehicles to "Flip" (He never needed my money, but I knew more about cars and were to get them sold)

Never more than a handshake between us, but there was never more than 2-3k at stake.


We have been growing at an insane pace, Our commercial accounts have tripled, referrals through the roof, our groupon exploded (Regretting it, but we aren't LOSING money on it yet.)

So I approached him about possibly "Investing" in our company, not so much infusing CASH, but using HIS credit to buy new(er) equipment/truck.
He knows all about the Vortex/AeroTech systems (Used to own a huge carpet cleaning company in the 80's)
and asked me if I was wanting something like that, I told him about the JUDSON C4 and putting it in a Sprinter, and he seemed to like that idea better.

This is JUST TALK and neither of us made a hand-shake, just chewed the fat. But he seemed to be excited about it.


Besides the obvious like drawing up paperwork etc etc if we actually do something,
What suggestions would those of you out there have for me that have been through this?

Ive always paid CASH for everything (why i have ZERO credit), and built my own shit, Never a loan for ANYTHING... just tired of being a MECHANIC and a carpet cleaner.

 

[Marc Imbesi]

I would start with a business plan that you both agree on....

 

[steve g]

my question is what in the world are you thinking?? I think its a really bad idea, the guy is your friend, money deals like this most of the time happen with yours or his feelings being hurt in the end. I know it doesn't seem likely now but, think down the road. the other thing is equipment and the type of it is not what makes you successful. having a fancy machine sitting in a sprinter is not making you money in and of itself.

keep doing what you are doing, buy used equipment for half price or less that way you are not stroking yourself about how great of equipment you have. its about money in your pocket, you don't want any extra advice on how to run your business, look at this like a loan, with a possible bad ending.

 

[Al]

I agree with Steve for the same reasons

 

[handdi]

Use him as your bank so to speak
Offer him 10 percent intrest and I am sure he would be interrested

 

[ACE]

Just get a loan. If credit is week look at SBA loans. I got a 35K SBA loan with chapter 7 on record. I would pay aroud 6% APR. Or better jet, just keep paying cash.

 

[Guest]

No matter how you word it it will make you feel like he's a partner....you lose something in this. If you lack credit history and are doing fairly well I would suspect a banker would work with you if you have some time under your belt and explain the situation. My scenario was I did over $400K in loans (over years) for a couple houses to equipment with a small local bank and not one loan showed up showing my good pay record. I bet if I didn't pay it would have showed bad! So my point is....you need to work through this as a business owner.Get established. how long have you been in business? I did...I told another banker what happened and he hooked me up. Now I have good credit. Just a tip ...good luck.

 

[Dolly Llama]

Ash, I'll admit to being a damn poor business man, but I have to ask...if your biz is "booming" , why do you need a biz partner just to buy new equipment ?

..L.T.A.

 

[Guest]

I hope I'm not wrong but I took it as he had NO credit.....NO credit is sometimes as bad as Bad credit....your first loan or two need to be smaller loans and they will carry slightly higher interest rates...prove yourself (as the banker says) then it will get better and better. Try and ask if they will back you to buy some basic equipment in the $3000 to $4000 range....then before you pay it off after 8 months or so hit em up for a 6000 or $7000 loan. Then go from there. After this loan you could get easy credit anywhere but the bank will want to keep you. Remember they make money doing this. If all else fails borrow against your own money...$3000 secured and pay it off....you then establish. Sucks but its what I did. :roll:

 

[randy]

I agree with Steve & Al for the same reasons plus you probably don't need an investor. Go talk to your banker. You could probably finance a Judson in a Sprinter with maybe $10,000 down.

Also Larry makes a valid point. If things are really rocking, cash flow should be sufficient to grow the business.

I always wonder what the hell is going on when I see companies that have been around 10-20 years still tapping lines of credit just for operational expenses.

Best of luck

 

[renegade_cowboy]

Ash, I'll admit to being a damn poor business man, but I have to ask...if your biz is "booming" , why do you need a biz partner just to buy new equipment ?

..L.T.A.

You may be a damn poor business man, but you make some good points...sometimes shiteatinggrin

 

[lance]

Ask him to co-sign a loan for at least the Sprinter. Then pay cash for the TM or get a loan for both.

See what this man expects from the deal.....get his best scenario, highest expections up front so you know what you are dealing with. If the business is going great, you will have a greater peace of mind and more jobs done with a new van and TM.

Then you could always pay him a percentage of the new business that comes in because of his helping you. Maybe he justs wants $300 or $400 a month until you repay the loan....find out.

If he co-signs the loan for you he cannot take the equipment away from you unless you miss two or three payments and then the bank will ask him if he wants to pay those. The equipment with be in your name, and you will be the one most responsible to pay the loan each month.

This way you are not borrowing money from him.

 

[AshleyMckendree]

Thanks for the suggestions,
Im sure It wont go any farther than "Talk", and my gut tells me to just keep doing what has worked for me...

Yes biz is "Booming", But when your father owns 40% of the company, and upkeep on aging equipment equals that of what a payment on a new(ish) truck/equipment would be, not counting the cost of TIME to play MECHANIC, Cash flow isnt enough to buy 40k in equipment next week.

Someone asked how long ive been in business, I took ownership of the company in 01, but have RAN the company since 99 (16 years old LOL) (So my dad could play with his toys IE: Recording studio)

 

[renegade_cowboy]

Thanks for the suggestions,
Im sure It wont go any farther than "Talk", and my gut tells me to just keep doing what has worked for me...

Yes biz is "Booming", But when your father owns 40% of the company, and upkeep on aging equipment equals that of what a payment on a new(ish) truck/equipment would be, not counting the cost of TIME to play MECHANIC, Cash flow isnt enough to buy 40k in equipment next week.

Someone asked how long ive been in business, I took ownership of the company in 01, but have RAN the company since 99 (16 years old LOL) (So my dad could play with his toys IE: Recording studio)

Time to sit down with your dad and go over the needs for the business you share. Without the equipment running, there is NO business.

Write out a business plan to include new equipment and sit down and work something out with your dad, Im sure he doesnt want his son to be burden with this stress.

 

[ACE]

If I were you, I would be working on a plan to buy pops out! :shock:

40% of the top is allot if he is no longer involved in operations.

 

[Mike Draper]

no credit or bad credit, with enough money down any body will give you a loan at a decent interest rate. Dont over extend yourself either, most people assume that the money they are making in their business will keep coming in that way. I've seen to many business owners fail for spending all that they make every year and when hard times come around, they dont make it through.