How to Get Money so You Can Make More

Tell them about your market. Get the registration numbers of high-end cars in your zip code areas. How many auto dealers are near your place of business, fleets, etc.? Remember, your banker won’t be aware of these things, so you need to strategically provide details that show the positive business potential for your detail services.

The question of how you will pay the loan back is answered by your cash flow projections. These calculate how much revenue and profit the investment will generate, and when that cash is going to be received.

Your projections should be based on your numbers, regarding the potential for your market and some reasonable assumptions about how much of that market you expect to attract.

Collateral

If your proposal answers all of the pertinent questions, the bank will still probably ask for some sort of collateral and/or a personal guarantee from you in case your business fails. All they really care about when granting a loan is how you are going to repay the loan if the business fails.

The collateral, of course, can include the assets (equipment and inventory) of your business, real estate, marketable securities, or other tangibles the bank can sell if it has to recoup the money loaned to you. They won’t consider as collateral the value of your detail business because banks don’t want to operate a detail business, which is what they would have to do if they took over your business in the event of a failure.

A personal guarantee is different. A lien against your home, bank account or other personal assets assures banks they can recoup their money in the event of a failure and, just as importantly, establishes that you have a strong incentive to keep operating the business and live up to the terms of the loan. Lenders know it is much easier for the borrower to walk away and leave the bank holding the bag than it is to give up your family home.

Keep in mind that if you put your home up as a personal guarantee, bankruptcy will not protect you from losing your home.

It’s understandable, considering the state of the economy, that many of you are reluctant to take on new or additional debt. However, if you have a sound business plan that takes the current economic conditions into account, it may actually be a good time to borrow to grow your detail business.

The competition may be lying low, so it’s easier to gain market share now, rather than later. Prospective customers are always receptive to value propositions, so now is an excellent time to get capital to fund growth. Financial institutions are eager to make loans (no loans mean no profits for them), and interest rates are hovering at historic lows.

You can get the capital you need if you invest a little of your time thinking through the situation before going to the bank. Anticipate the questions that will need to be answered, explore all the options, and put together a professional-looking, thoroughly documented proposal.

If you do your homework and take some initiative, you will be able to make money the best way possible — with someone else’s.

Keith Duplessie is technical services manager for Portland, Ore.-based Detail Plus Car Appearance Systems, in charge of all installations, training and technical services. He can be reached at keith@detailplus.com.

SIDEBAR

Borrowing from the SBA

One institution that is considered a source of capital but really isn’t is the Small Business Administration (SBA). The SBA doesn’t make loans; it only guarantees them.

You must first apply to your bank or other financial institution for the loan. The bank may choose to make the loan on its own or decide the loan requires additional support in the form of an SBA guaranty. The bank will then request SBA backing.

The SBA doesn’t secure 100 percent of the loan amount. The financial institution will have to come up with at least 15 percent to 25 percent of the funds.

The SBA also requires collateral, personal guarantees and a sound credit history. For more information, visit www.sbaonline.sba.gov.