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FrankD80

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May 31, 2017
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Here goes....deep breath

So I'm going on year ten of selling on Amazon and selling online in general. Last year, I made some mistakes with a supplier and let's just say I spent more than I made. This has caused a rather sizeable credit card bill. Now I'm a one man operation so the sales from Amazon and other eCommerce sources are steady and consistent. Thing is they will never put sizeable dents into the balance. It hasn't gotten worse by any means since the bad decision, but it's a slow moving turtle.

My wife and I are the perfect example of what you call living in relative poverty. We live in an expensive area of the US and made very modest salaries and "on paper" we have a nice financial foundation. However, the liquid aspect creates us to be tight more often than not.

This looming balance keeps me up at night and I know I'm responsible for it however, I cannot think of any ways to attack this than I have been. I rather not take from what we have wrapped up but sometimes my mind crosses that option.

I would really like to get some advice from those financially savvy individuals out there and see what suggestions you may have.

It's the elephant in our house but I'm willing to take it head on.

Thank you for your time and advice.
 

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WJK

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Here goes....deep breath

So I'm going on year ten of selling on Amazon and selling online in general. Last year, I made some mistakes with a supplier and let's just say I spent more than I made. This has caused a rather sizeable credit card bill. Now I'm a one man operation so the sales from Amazon and other eCommerce sources are steady and consistent. Thing is they will never put sizeable dents into the balance. It hasn't gotten worse by any means since the bad decision, but it's a slow moving turtle.

My wife and I are the perfect example of what you call living in relative poverty. We live in an expensive area of the US and made very modest salaries and "on paper" we have a nice financial foundation. However, the liquid aspect creates us to be tight more often than not.

This looming balance keeps me up at night and I know I'm responsible for it however, I cannot think of any ways to attack this than I have been. I rather not take from what we have wrapped up but sometimes my mind crosses that option.

I would really like to get some advice from those financially savvy individuals out there and see what suggestions you may have.

It's the elephant in our house but I'm willing to take it head on.

Thank you for your time and advice.
It's not going to get better anytime soon. You are circling the drain and going down fast. Make a new plan. Plug the hole in that drain immediately. Debt creates more debt. Debt creates chaos and missteps. The longer you wait, the worse it will get!
 

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Can you give us some scale of the numbers here?

ie
You bought: $150k of inventory on credit card
Annual sales: $50k a year
Your margins are: 45%


If this debt bought inventory... well, eventually you will sell your way out of it, no?
If this debt bought something else... very different problem.


I'm struggling to understand what you bought so much of, that you don't have a hope of turning into cash.
I've done this before... got a great price on product... but it took us 8 YEARS to sell it.
Unbelievable money pit, and incredibly idiotic of me.

Did you do the same thing, or did you spend money on intangibles?
 

biophase

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Here goes....deep breath

So I'm going on year ten of selling on Amazon and selling online in general. Last year, I made some mistakes with a supplier and let's just say I spent more than I made. This has caused a rather sizeable credit card bill. Now I'm a one man operation so the sales from Amazon and other eCommerce sources are steady and consistent. Thing is they will never put sizeable dents into the balance. It hasn't gotten worse by any means since the bad decision, but it's a slow moving turtle.

My wife and I are the perfect example of what you call living in relative poverty. We live in an expensive area of the US and made very modest salaries and "on paper" we have a nice financial foundation. However, the liquid aspect creates us to be tight more often than not.

This looming balance keeps me up at night and I know I'm responsible for it however, I cannot think of any ways to attack this than I have been. I rather not take from what we have wrapped up but sometimes my mind crosses that option.

I would really like to get some advice from those financially savvy individuals out there and see what suggestions you may have.

It's the elephant in our house but I'm willing to take it head on.

Thank you for your time and advice.

Since you are doing ecommerce, can you sell your home and move somewhere cheaper?
 

FrankD80

New Contributor
May 31, 2017
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Florida
Can you give us some scale of the numbers here?

ie
You bought: $150k of inventory on credit card
Annual sales: $50k a year
Your margins are: 45%


If this debt bought inventory... well, eventually you will sell your way out of it, no?
If this debt bought something else... very different problem.


I'm struggling to understand what you bought so much of, that you don't have a hope of turning into cash.
I've done this before... got a great price on product... but it took us 8 YEARS to sell it.
Unbelievable money pit, and incredibly idiotic of me.

Did you do the same thing, or did you spend money on intangibles?
Thanks everyone for the reply.

My apologies as I should of added some details.

As far as how I arrived here, there are more details I should add. So prior to this getting out of control, my sources of income outside of the normal job were Amazon selling, Amazon coaching, and Wal-Mart sales.

Now I got extremely burnt out and had a stop doing that because of the demands from the students and the fact that I couldn't focus on my amazon store. So sales were slower and that source of income went away.

On the Wal-Mart side, I partnered with a drop shipper (my mistake) and was the receipt of a lot of returns that Wal-Mart was refunding and I had no idea about it.

Couple that with a click funnel mishap and interest, we are were we are now.

So I'd say the total bill for round numbers sake is $30,000 and as a one man show, my monthly Net from Amazon is about $2,000 with another $1,000 coming from Wal-Mart. In Amazon world, you have to keep "feeding the beast" so to speak to it just seems like it's never ending.

I really appreciate the advice.
 

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Do you still have the inventory? Where did the inventory of the hypothetical 30k go?

If so, can you adjust your MSRP or model to make a higher profit to pay back that debt?

Whats the interest on your debt? Do you have equity in your house? Do you have assets you can sell?
 

FrankD80

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May 31, 2017
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Florida
Do you still have the inventory? Where did the inventory of the hypothetical 30k go?

If so, can you adjust your MSRP or model to make a higher profit to pay back that debt?

Whats the interest on your debt? Do you have equity in your house? Do you have assets you can sell?
Yes for sure and it sells...slowly and for a lower net then anticipated.

I can try that for sure, just unsure as to how much longer that would take. I could certainly try.

The interest is 12%. We have transferred some balances to 0% cards and have paid those off. We do have equity in the house yes and we have quite a bit in assets.
 

MHP368

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bill for round numbers sake is $30,000 and as a one man show, my monthly Net from Amazon is about $2,000 with another $1,000 coming from Wal-Mart.

Your business makes 36k a year NET and you have 30k in debt @ 12%apr

so...your monthly payment just for interest is...350ish bucks?

How much equity is in your house?

how is your business structured? (sole prop? llc?)

What are your liquid assets

also hows growth in the business? can you give us a year over year going back a bit?
 

FrankD80

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May 31, 2017
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Your business makes 36k a year NET and you have 30k in debt @ 12%apr

so...your monthly payment just for interest is...350ish bucks?

How much equity is in your house?

how is your business structured? (sole prop? llc?)

What are your liquid assets

also hows growth in the business? can you give us a year over year going back a bit?
Roughly - give or take of course.

We are are basically a few grand per cycle. Which is basically the net.

I'd say about anywhere between $70-$80 is in equity in the house.

The business is structured as a corporation.

The business has been picking up because I've more time into it and been feeding Amazon with inventory. Couple that with Covid and the Holidays then you have people shopping more online. So right now, quarter 4 is looking great with a 65% growth from last year,
 

Envision

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Roughly - give or take of course.

We are are basically a few grand per cycle. Which is basically the net.

I'd say about anywhere between $70-$80 is in equity in the house.

The business is structured as a corporation.

The business has been picking up because I've more time into it and been feeding Amazon with inventory. Couple that with Covid and the Holidays then you have people shopping more online. So right now, quarter 4 is looking great with a 65% growth from last year,

Id cash out refi your house for the existing debt payment, pay it 100% off and learn a tough lesson. It sucks but that interest rate at your current income is going to eat you up
 

MHP368

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The business is structured as a corporation.

Well thats huge!, did you personally guarantee the debt? cosign the loans?

Whats the total value of all the corporations assets right now?

You said its walmart and amazon right? so other than inventory the actual value is the storefronts reputation and your hard earned buy box position yes?
 

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FrankD80

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May 31, 2017
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Well thats huge!, did you personally guarantee the debt? cosign the loans?

Whats the total value of all the corporations assets right now?

You said its walmart and amazon right? so other than inventory the actual value is the storefronts reputation and your hard earned buy box position yes?
No, these were all charges on a card. I haven't taken out any loans.

I'd have to check the total value of assets to give you an exact number but I would say anywhere between 5-10K

Yes that is correct.
 

MHP368

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No, these were all charges on a card. I haven't taken out any loans.

I'd have to check the total value of assets to give you an exact number but I would say anywhere between 5-10K

Yes that is correct.

and the storefront names, are they registerd brands or just names? , if they're brands are they listed as corporate assets or personal?

the cards are in the corporations name as well?
 

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FIRST, you need to make sure you are making a marginal profit and watch your numbers on your store. That is why this happened in the first place.

The next thing I would do is refinance the debt. Get the interest rate down. There are a lot of ways to do this.

Ex, balance transfer cards with 0% interest. A debt consolidation loan. A PPP loan or something might also be a super low interest way to refinance this.

Next, I would be looking for ways to wipe it out in big chunks... Think big wholesale deals... If you can make a couple of deals that profit you 10 grand each over the next year with that 0% interest rate, you are done, and not only that, you have built a new wing of the business that will likely keep paying you over time.

Don't look at 30k like an insurmountable mountain, it really isn't that much money. Hell, most people owe more for the fancy car that they "needed." At least you rung it up doing something productive and good for your family. Speaking of good for your family, moving to a less expensive area like @biophase said will make you better off immediately.
 

FrankD80

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and the storefront names, are they registerd brands or just names? , if they're brands are they listed as corporate assets or personal?

the cards are in the corporations name as well?
They are just names which are the names of my corporations on my business license.
 

Kak

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and the storefront names, are they registerd brands or just names? , if they're brands are they listed as corporate assets or personal?

the cards are in the corporations name as well?

I know where you are going with this, but unfortunately the vast majority of business credit cards are personally guaranteed.
 

MHP368

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They are just names which are the names of my corporations on my business license.
You should talk to an attorney about possibly declaring the corporation bankrupt (chapter 7) and liquidating existing stock (not online, like they would take ownership and auction it) toward paying the debt (even if it didn't net 30k that's there problem).

You can form a new company, open a new bank account and continue operations from that. Meanwhile the existing stock goes away but so does all the debt (and it doesn't effect your personal finances at all or require you to use equity from your home)

Think about it, does it make sense to use nearly half your houses equity to pay down debt given the margins you have? , and you've already concluded you wont be able to grow sales enough to pay it off through the corporation. I say good on you for filing as a true corporation and keeping your own assets safe , the creditors get to eat it on this one (don't worry they'll make plenty enough).

But yeh, you'll have to talk to an attorney, worth the money though, they might tell you that given your numbers you can't go the chapter 7 route and have to go chapter 11 and thats probably not going to work with a corp your size (you might get them to force lower interest rates on the debt but the trustee will control the company)
 

FrankD80

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May 31, 2017
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Florida
FIRST, you need to make sure you are making a marginal profit and watch your numbers on your store. That is why this happened in the first place.

The next thing I would do is refinance the debt. Get the interest rate down. There are a lot of ways to do this.

Ex, balance transfer cards with 0% interest. A debt consolidation loan. A PPP loan or something might also be a super low interest way to refinance this.

Next, I would be looking for ways to wipe it out in big chunks... Think big wholesale deals... If you can make a couple of deals that profit you 10 grand each over the next year with that 0% interest rate, you are done, and not only that, you have built a new wing of the business that will likely keep paying you over time.

Don't look at 30k like an insurmountable mountain, it really isn't that much money. Hell, most people owe more for the fancy car that they "needed." At least you rung it up doing something productive and good for your family. Speaking of good for your family, moving to a less expensive area like @biophase said will make you better off immediately.
Thanks for the reply. Yes...spot on! That is exactly why it happened.

So with a PPP loan or something, it would just transition things from high interest to a much lower interest. That is the intent right?

How does the replenishing of inventory and the purchasing of new inventory then factor in? Doesn't that add to the troubles?

Thank you for the words of encouragement. I do appreciate that.
 

FrankD80

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May 31, 2017
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40
Florida
You should talk to an attorney about possibly declaring the corporation bankrupt (chapter 7) and liquidating existing stock (not online, like they would take ownership and auction it) toward paying the debt (even if it didn't net 30k that's there problem).

You can form a new company, open a new bank account and continue operations from that. Meanwhile the existing stock goes away but so does all the debt (and it doesn't effect your personal finances at all or require you to use equity from your home)

Think about it, does it make sense to use nearly half your houses equity to pay down debt given the margins you have? , and you've already concluded you wont be able to grow sales enough to pay it off through the corporation. I say good on you for filing as a true corporation and keeping your own assets safe , the creditors get to eat it on this one (don't worry they'll make plenty enough).

But yeh, you'll have to talk to an attorney, worth the money though, they might tell you that given your numbers you can't go the chapter 7 route and have to go chapter 11 and thats probably not going to work with a corp your size (you might get them to force lower interest rates on the debt but the trustee will control the company)
How will that affect ones credit? Currently my credit is impeccable.

I can talk to an attorney for sure. My good buddy deals with this stuff all day long.
 

Kak

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So with a PPP loan or something, it would just transition things from high interest to a much lower interest. That is the intent right?
Yes. Exactly.

How does the replenishing of inventory and the purchasing of new inventory then factor in? Doesn't that add to the troubles?

Yes, it can if you don't fix the foundation first. That is part of figuring this out... If your marginal profits are good and the sales are stable, then the buys are good. You need to take a stranglehold of those numbers and make smart buying choices.

If I am honest, I am a bit taken aback by the coaching side of this... I will give you the benefit of the doubt, but the profitability thing is pretty elementary. You built a business on a foundation of sand. You let your expenses get away from you. Fix your foundation FIRST, and I wouldn't be coaching people until you can help others do the same.
 
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MHP368

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How will that affect ones credit? Currently my credit is impeccable.

I can talk to an attorney for sure. My good buddy deals with this stuff all day long.
It shouldn't, the company has its own credit score 9I think dunn & bradstreet controls that) its linked to your EIN (tax ID number0 for the corporation.

Thats like, the whole purpose of you having formed it as a corporation. Separate your personal and business finances.

Why take 30k which could get however much return passively to payoff 12% corporate debt for a company that makes 3k a month NET?

Of course again, talk to the lawyer because the fact that the company DOES still make money might make chapter 7 a no go.
 

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FrankD80

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May 31, 2017
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If I am honest, I am a bit taken aback by the coaching side of this... I will give you the benefit of the doubt, but the profitability thing is pretty elementary. You built a business on a foundation of sand. You let your expenses get away from you. Fix your foundation FIRST, and I wouldn't be coaching people until you can help others do the same.
Hmmm okay. I mean my coaching was specific to sourcing for Amazon and the location of profitable and products that are able to be replenished.

If I am coming off as someone who is unknowledgeable it is because I am questioning everything including myself and prior knowledge.
 

FrankD80

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May 31, 2017
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It shouldn't, the company has its own credit score 9I think dunn & bradstreet controls that) its linked to your EIN (tax ID number0 for the corporation.

Thats like, the whole purpose of you having formed it as a corporation. Separate your personal and business finances.

Why take 30k which could get however much return passively to payoff 12% corporate debt for a company that makes 3k a month NET?

Of course again, talk to the lawyer because the fact that the company DOES still make money might make chapter 7 a no go.
Thanks for the advice. Much appreciated!!!!
 

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