Good Financing Is Just Good Business

Richard Zoppo was already running a successful New Jersey pest control company when he discovered a tempting second route for sale. By jumping on die opportunity, he could double his business, expand to new territories, and garner more clients — all for an asking price of $35,000. Zoppo told that fine story to the bank where his business account had been growing for more than five years. He spent about $500 and weeks of preparation to have his accountant complete a loan request that included tax returns from both businesses, profit-and-loss gfgbhistories, and a plan for integrating the two routes. He submitted the request, and waited. And waited, and… about two weeks later, the loan officer called to say, “I never saw such a nice proposal. Who’s your accountant? And, by the way, we’re not going to give you the money.”

Another bank request, another few weeks, and another resounding “No.” Zoppo was getting desperate, but lucky for him, so was the motivated seller. “Why don’t I just lend you the money?” the seller asked. With that, a successful deal was struck. The two exterminators drew up an agreement that gave Zoppo a five-year, 9 percent loan — and both walked away happy. “It’s better this way,” says Zoppo. “I’d rather pay him than a bank anyway.”

Not that he had a choice. The sad truth is that even though bankers crow about their emphasis on entrepreneurial lending and the Internet is plastered with small-business funding opportunities (some more legitimate than others), you’ll be hard pressed to find money when you need it in a hurry. In fact, fewer than one of every 400 companies looking for venture capital gets it. And even then, it’s a long, drawn-out process that can take up to a year for approval.

So what do you do if you’ve got a bright idea or a big deal that calls for immediate cash? Look closer to home, and be creative. Here are some sources when you need money in a hurry.

Whip out the plastic.

Credit cards aren’t pretty, but they work. When father and son Nick and Steve Uricchio were preparing to open their Bakersfield, California, restaurant, they spent three months applying for credit cards. They ended up with 34 cards, which they maxed out to the tune of $160,000. They leveraged that money to make down payments on equipment they leased or took loans on. A recipe for disaster? Hardly. Their restaurant grossed $1.2 million in its first year and these chefs to the stars have almost completely paid off their cards.

Credit cards make sense for smaller amounts of cash too. If you’re in a time crunch for buying a new computer, why not just put it on a card and pay it off when you get the cash? Business interest is deductible and you’ll save time by not trying to beg or borrow the money elsewhere. If you’re looking for lots of cash, the lower the interest rate on the credit card, the better.

Hit up the motivated seller.

Need a lot of equipment, a new business van, more storage space? Follow Zoppo’s lead and get the seller to carry you. You can arrange a private loan, lease your equipment, or buy what you need from a consumer outlet offering “No payments until May 1998!!” They’re out there. Suppliers will also go surprisingly far to float loans to people who buy their products, if they expect you to be a steady buyer. Let’s say you need 500 glass bottles every month so you can fill them with your new aromatherapy oils. Shop around for a glass maker who will send bottles on your purchase order, rather than your check. That way, you gain time to sell the oils before you pay for the inventory.

Call on loyal customers.

Many entrepreneurs are shy about getting their money up front, but don’t be — especially if you can offer a discount for early payment. Whether you sell tax services or taxidermy, all entrepreneurs incur expenses. To help you recover out-of-pocket client costs (such as outlays for printing), send a bill in advance of paying for the service. That is, unless lending money to clients is your business, in which case you already know where to find quick funding.

Tap your life insurance.

If you’ve accumulated cash value in an old-fashioned whole or universal life insurance policy, you can lend it to yourself cheap. And if your kids are grown and your spouse is self-sufficient, there’s a hidden bonus: You may never have to repay a policy you don’t need to collect on.

Seek out a speedier SBA.

Small Business Administration loans can be notoriously slow, but there are two programs that can land you fast cash. The first, called the SBA microloan program, offers loans of up to $25,000 through more than 100 nonprofit intermediaries to help low-income borrowers start businesses. The SBA says applications usually take a week or less to process. To find a lender near you, call 800-8ASK-SBA.

The SBA also guarantees “low documentation” loans of up to $100,000 through banks as well as nonbank lenders. If you qualify, you may be able to get your financing in under a week.

Try a home equity credit fine. Perhaps you want to keep your business and personal finances separate. But if you’re confident in your ability to repay a loan, you can’t do much better than a home equity line. Interest rates are low, because you’re putting your house up as collateral. If you already have a line, you just have to write a check to access your money.

Ask Dad (or Mom or your brother-in-law) to spare a dime.

The pros and cons of borrowing from family may be self-evident: It’s fast and it’s cheap, but beware those psychological strings that may be attached. If your relative can’t afford to lend money, don’t even ask. If someone can and is happy to fuel your business, draft a formal loan agreement and make payments on a timely basis.

Ferret out factors. When you have a business with a strong cash flow, you can sell your purchase orders or accounts receivable for 50 to 90 cents on the dollar to a finance company called a factor.

Shore up a line of credit before you need one.

Some banks are happy to provide a credit line when you’re not actually up against a slew of bills, and while you have the time to jump through those hoops. For instance, Wells Fargo Bank is aggressively pushing small-business lines of credit up to $25,000 that you can access by check or card.

Indeed, the best way to get money in a hurry is to plan far enough in advance that you’re not desperate. If you aren’t facing big expenses now, think about what you might need in three to five years. This way, you can use all of the above sources, including the more mainstream network of lenders that like to spend months mulling over your financial future.

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