Interiorscape Borrower Learn from My Experiences
Making a profit is seldom easy in any industry, but borrower beware, especially interiorscape business owners.
My First Borrower’s Story
In 2000, I had a great credit score. With company cash flow steadily increasing, money was easy to come by. I’m smiling, thinking back to when I walked into my local bank branch, filled out a simple application, and walked out an hour later with a twenty-thousand-dollar credit line. The bank didn’t care what I was using the money for, and I was not diligent about it either. Boy, did that loan and others return to haunt me when the housing bubble burst and my company’s cash flow dried up quicker than a puddle in the Sahara.
Clients began cancelling. Debt began skyrocketing. I remembered something the former owner of my interiorscape business said: “Just as certain as this business will go through good economic times, you will also go through bad. The trick is … if you want to make it out of the hard times—don’t get yourself into debt and you’ll survive.”
This was excellent advice. I just ignored it at the time. I was young, reckless, and enjoying life. Sure enough, though, he was right. After going through that extremely stressful and devastating recession, I have been extremely cautious about taking on any company debt with my second business.
My Borrower Story Today
The economy is growing, and the housing industry has become a seller’s market. This past year, I realized having no lines of credit from a rich relative or bank has prevented me from expanding my services. Now that I wanted to start borrowing again, I found nobody wanted to lend money because my business does not have a credit score.
Searching for help, I contacted Dunn & Bradstreet. They offered to find the credit history I needed but it would cost me several hundred dollars. Not wanting to pay that kind of money, I decided to work on it myself.
I first reached out to vendors I have been doing business with for years. Large greenhouses and floral suppliers that offer credit terms were my first opportunity. When I needed a new van, I asked the dealership to finance it through a commercial lender so the payment history would show up under the business. Creditors are more likely to finance a high-risk business when there is collateral they can recoup. The interest rate was higher, but I felt the opportunity for a better company score was worth it.
After six months of keeping up with all my financial obligations, my phone, mail, and email started to flood with loan offers. I have found creditors that bombard you tend to be much costlier. Some would say these are predatory loans, where the terms would be the same as a loan shark. Interest thirty percent or more, pre-payment penalties, and expensive late fees are all part of the package.
When you’ve been struggling for years just to open a credit card, offers for several thousand dollars can seduce you. Without a solid plan for using the money to increase profits, this type of financing can become a nightmare. After all, there’s a reason why businesses like this charge so much interest: the odds for most companies to successfully repay them are low.
The Future for This Borrower
Realizing loans like this are a big risk when my gross sales have been conservatively increasing, I’m now seeking an SBA loan which offers much better terms and reasonable interest rates. The downsize of obtaining a government backed loan is the process. Like most dealings with the government, the SBA process is much more involved, with time consuming requirements. So much so, I have to continue this conversation in another blog.
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