Stop what you're doing. Get a line of credit.

[AgainstAllOdds]

At most banks, for $150 a year you can open up a business line of credit up to $100,000 without providing financials. All you need is a personal guarantee and good personal credit.

Then, you have $100k sitting for you for whenever you need it.

When you need it, you only pay interest on the amount you take out.

Interest rates are around 7% -- depends on the industry risk and your personal credit score.

Payback is 2% of the outstanding balance per month.

Talk to your local business banker. Line up the capital before you need it. Get ready to scale.

*Warning* Only take on debt when you know you can easily pay it back or need it for a "no-brainer". An example of this would be having customers lined up for your product/service and just taking on debt to service the order.

 

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[Vigilante]

Where are these magical banks?

So far I’ve only found one bank willing entertain the idea of me applying for a Line. Every other bank, upon hearing I was less than 2 years old said no.

You look much older than that and you are very articulate

 

[Scot]

If you have customers lined up why wouldn't you just take pre orders to service the order?

For someone who’s admitted to not succeeding thus far in business, you’re talking a big game.

Most of the successful players on here all have active lines of credit. They’re extremely valuable tools to use to have access to larger capital at lower interest rates.

The pattern I’m seeing here is, you’re thinking small. Your intro was that you don’t want to be a millionaire. Yes, if all you’re shooting for is $4k in MRR, then you don’t need a LOC, investors, and can presell your digital product.

But if you’re shooting for a $20m per year in revenue business that’s inventory heavy, the rules of the game change.

You need to shift your perspective and realize that “business” is a broad landscape and your preconceived notions don’t apply to every single one.

 

[Scot]

Sorry, if it sounded snarky.

Your right, I don't have the skills or the knowledge that's why I'm asking. I want to know why the (succesfull) people who chose that path chose it over another.

Okay, so sounds like not the process for me, but doesn't mean I can't learn from it right?

So is this more helpful to a inventory heavy business, perhaps less useful for a high end Saas aiming at 20mil? Or more helpful for inventory?

What better way to change your mindset, than asking questions?

Lines of credit work really well on businesses that have a lot of acounts receivable. My business for example, I have to run production on inventory, then ship to customer and invoice them, wait 30-45 days to be paid. So, I usually got a 60 day cycle between having to buy the product and getting paid for it.

A lot of industries don’t work on preorders. In almost every consumer packaged good market, you’d be laughed out of the meeting if you asked for upfront payment, let alone preorders.

If we’re talking about a Saas product or any other digital product, you can probably get away with using preorders to start the ball rolling.

I think the problem is that we see things like Kickstarter. People preorder sometimes up to 7 figures of product. That’s a great way to get started. But what we don’t see if the next few years of that business. In order to continue running products they need more funding.

Looking at my business again. When I’m running at peak efficiency, I’ll be turning a 30% margin. That’s industry standard for me. But at my lower scale, I’m turning 5-10% margin. If I kept going slow and steady, only operating off my profit, it would take me a couple years to get to a bigger order size. And this is assuming I never had any expenses.

The best thing you can do when evaluating the potential need is plotting out what your business looks like over the next 5 years. It’s important to know what the cash flow structure will look like.

 

[Scot]

Where are these magical banks?

So far I’ve only found one bank willing entertain the idea of me applying for a Line. Every other bank, upon hearing I was less than 2 years old said no.

 

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[CPisHere]

Lines of Credit are great because if an opportunity comes up, it's incredibly accessible.

That said, I did have to give financials for mine. And different people will get approved for different amounts based on their financials. Each bank probably has their own slight differences as well. Mine only wanted to start with a $25k LOC, then a few years later added an additional $50k.

 

[IGP]

I'm thinking of thinks like online retailers with their Just-in-time which is almost dropshiooing too. Customer buys product, then it gets purchased, sold and transhipped.

If you are drop shipping, fine no problem. But even in an e-commerce business (self-fulfilled) like mine where I send $30K+ to china every month to buy inventory you need credit. I have an Amex platinum and an Amex Gold card to handle my float with an unlimited line of credit. (I say that because they don't tell you a limit).

What happens when Q4 rolls around and I want to be prepared for BFCM? Now I need to order $100K worth of product if I really want to smash Q4.

What if Amex decides that I am only worthy of 50K? Now, I'm screwed. And keep in mind I am small potatoes!

You don't understand because you are not speaking from experience.

 

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[CareCPA]

Where are these magical banks?

So far I’ve only found one bank willing entertain the idea of me applying for a Line. Every other bank, upon hearing I was less than 2 years old said no.

I went local. I was buying real estate with no business history. The big banks said no, but the local bank loaned at great rates.
Real estate may be different than inventory-based businesses, but worth a shot.

 

[IGP]

Wait, so are you saying that PNC does or does not want to see 3 years in business?

Every time I login to my WellsFargo account, they prompt me for a 3.99% fixed rate and (free for the first year) line of credit up to 100K.

Could be an option?

 

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[Scot]

I went local. I was buying real estate with no business history. The big banks said no, but the local bank loaned at great rates.
Real estate may be different than inventory-based businesses, but worth a shot.

Yeah, with RE, they can secure the loan. If you default, they still have a juicy piece of real estate to liquidate.

You look much older than that and you are very articulate

Leap years and such.

Most banks have minimum 2 yrs in business from what I’ve seen.

 

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[G-Man]

Every time I login to my WellsFargo account, they prompt me for a 3.99% fixed rate and (free for the first year) line of credit up to 100K.

Could be an option?

This

If the business age is a roadblock, why not open a perosnal line. BBVA and Regions send me pre-approval for personal lines up to 50k probably twice a month. Since with a small business you're going to have to pg everything anyway, what's the difference.

Also, if you're not keeping at least 5-10 credit cards open and requesting line increases every 6 months, you're doing credit wrong

 

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[IGP]

How do you use your AMEX to pay China?

Hook an AMEX to Paypal and then use that credit card to pay with Paypal if your factory accepts Paypal.

Bam! - Double or triple points on your inventory costs!

I typically pay with Paypal, send a wire or use Alibaba if the client insists, in which case I pay with a Visa.

 

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[Vigilante]

If your business with Amazon is ever significant enough... I used Amazon Lending. Their interest rates were egregious but the approval process was almost instantaneous. At the maximum I had extended over six figures only secured probably buy the Amazon FBA inventory that I had at the time. It was very expensive but very easy. However, you have to wait for them to offer it to you. There are no restrictions on how you could use the money.

When I sold the company one of the terms of sale was at the purchaser paid off the Amazon lending agreement.

This won't be a solution for a lot of people but for those of you who have a significant Amazon Centric business this was very easy access to Capital.

 

[Ronak]

Thanks to this thread I now have six figures of credit lines that I didn't have before. The aforementioned short-term financing from PayPal, 0% for 1 year credit card with Chase, and a line of credit from a local bank that didn't require the usual ream of paperwork and was able to approve me the same day.

Will share some lessons learned later, but for now +Rep to OP!

 

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[LittleWolfie]

Sorry, if it sounded snarky.

Your right, I don't have the skills or the knowledge that's why I'm asking. I want to know why the (succesfull) people who chose that path chose it over another.

Okay, so sounds like not the process for me, but doesn't mean I can't learn from it right?

So is this more helpful to a inventory heavy business, perhaps less useful for a high end Saas aiming at 20mil? Or more helpful for inventory?

What better way to change your mindset, than asking questions?

 

[ApparentHorizon]

Where are these magical banks?

So far I’ve only found one bank willing entertain the idea of me applying for a Line. Every other bank, upon hearing I was less than 2 years old said no.

New banks. Big or small corp, when they open up shop in a new area, they're clamoring to get the ball rolling. Better rates too.

 

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[Tom.V]

LOC's are great to have just sitting around, both personal and business. I have a few now, but ideally want around $500k in accessible credit lines. I will have to do a little more shopping around.

@AgainstAllOdds Thanks for the PNC suggestion, submitting an application now.

Edit: Application in at PNC, went for the whole $100k. Should know something within 48 hours. Went ahead and hit every other bank in this one horse town I'm living in. Half of them didn't even know their bank offered a business line of credit.

Every time I login to my WellsFargo account, they prompt me for a 3.99% fixed rate and (free for the first year) line of credit up to 100K.

Could be an option?

I have one of those. Past the 1st year now, but it's fine. Even though WF is a shit company.

 

[Patrickg]

Sorry, if it sounded snarky.

Your right, I don't have the skills or the knowledge that's why I'm asking. I want to know why the (succesfull) people who chose that path chose it over another.

Okay, so sounds like not the process for me, but doesn't mean I can't learn from it right?

So is this more helpful to a inventory heavy business, perhaps less useful for a high end Saas aiming at 20mil? Or more helpful for inventory?

What better way to change your mindset, than asking questions?

Plus certain business like mine people don't preorder. I'm not selling the next coolest video game. I'm in a very need based business and if someone needs it they can't wait.

Just one scenario.

 

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[Ronak]

@Scot if you've been in biz at least 9 months and 42k in rev, loanbuilder.com from paypal may be an option. No hard credit pull unless you sign the loan agreement, and they go based on revenue/bank statements. Took about a day.

They offered me a decent amount, rate wasn't awesome, but it wasn't payday loan rates either, better than kabbage.

 

[Ronak]

I took out a line of credit.........4 of them to be exact.

And that's why I'm effed right now.

Care to elaborate?

My guess is you either got the wrong terms or misused the funds.

Debt is like fire, when used properly it can be very powerful, but let it get out of control and it will consume everything!

 

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[AgainstAllOdds]

Where are these magical banks?

So far I’ve only found one bank willing entertain the idea of me applying for a Line. Every other bank, upon hearing I was less than 2 years old said no.

I went with PNC.

Most of the banks want 3 years in business or more, which I'm guessing they check based on the LLC incorporation date.

Where are you seeing this? I have 430k in open sales right now and basically everyone refused me except one place "BlueVine Capital" and I only got 60k with 6% interest....

PNC.

And a 6% rate for business is pretty good.

 

[Scot]

Every time I login to my WellsFargo account, they prompt me for a 3.99% fixed rate and (free for the first year) line of credit up to 100K.

Could be an option?

Damn, I’ll look at it then.

LOC's are great to have just sitting around, both personal and business. I have a few now, but ideally want around $500k in accessible credit lines. I will have to do a little more shopping around.

@AgainstAllOdds Thanks for the PNC suggestion, submitting an application now.


I have one of those. Past the 1st year now, but it's fine. Even though WF is a sh*t company.

Damn that’s ambitious. I wouldn’t mind that to handle inventory though.

 

[ApparentHorizon]

Update: 2 weeks later, still no final response from PNC. I've never made a credit request and had to wait this long for a response. I did receive email correspondence from a loan closing officer, but she said it should be by end of this week. At this point, I'm not counting on it.

@ApparentHorizon do you know if there is a good resource anywhere to find banks that have opened recently?

Your local business journal/newspaper.

For example, we just had United Community Bank move into Spartanburg, and looks like they're acquiring in your area:

https://upstatebusinessjournal.com/united-community-bank-makes-move-raleigh/

They're aggressively expanding, so might be worth checking out.

 

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[Ronak]

I tried Chase Bank a few weeks ago and they were totally useless. I was told the only way I'd get approved is if my business was in the medical field. I've been banking with them for almost 20 years with credit over 800 and they more or less wouldn't give me the time of day.

One thing I've learned is that each branch and perhaps even each banker is like talking to a separate entity. As others have echoed here, a lot of these "bankers" don't know their foot from their...hand.

If you don't get a response from one employee, go to another branch and talk to their business banker. Some branches don't even have a business banker and have a regional person rotate between branches. There is a wide scope in quality between one banker to the next.

Keep trying until you find one that knows what they're talking about.

Case in point, Chase is my main bank, and I usually use a suburban location close to my home. They have no business banker on site. I've spoken to the regional person a few times on the phone, and every time they've insisted that I need two years of full financials to qualify for even a penny.

I basically wrote off Chase because I didn't want to deal with reams of paperwork.

After reading here and elsewhere about people getting good limits with Chase, I decided to call another branch in our city's business district. I met with the business banker there and it was like night and day. The other person was just giving me half the information, but when I sat down with this other knowledgeable banker for 30 mins and discussed my actual situation, I found out that I had many more options and the potential to borrow more than twice what I was even looking for. They provide up to 100k with 1 year financials, 250k with 2 years, and even talked about going 500k+ if I provided 3 years.

In this day and age, phone calls are old fashioned, but you wouldn't believe how many places I called that never followed up. We're not talking about Bubba's Bank, but large multinationals players just let leads slip through the cracks.

Nothing beats face to face, however. It allows you to separate the wheat from the chaff. It takes time, but time well spent IMO...

There are indeed many places that offer LOCs with no financials, also known as "streamlined" loans.
Besides PNC,
From my investigation:

TD Bank- up to 100k unsecured
Wells Fargo- up to 100k unsecured
US Bank- up to 100k unsecured
Synovus Bank- up to 50k unsecured

BOA may provide something, but they don't tell you what they need until after you apply.

I closed on 50k from a local bank in a matter of days, no financials, no collateral, 6.5% APR. Going to start the process with Chase as well to up that significantly.

Know your credit score:

wallethub.com gives free daily updated credit scores, which was invaluable in the process.

 

[Ronak]

If your business with Amazon is ever significant enough... I used Amazon Lending. Their interest rates were egregious but the approval process was almost instantaneous. At the maximum I had extended over six figures only secured probably buy the Amazon FBA inventory that I had at the time. It was very expensive but very easy. However, you have to wait for them to offer it to you. There are no restrictions on how you could use the money.

When I sold the company one of the terms of sale was at the purchaser paid off the Amazon lending agreement.

This won't be a solution for a lot of people but for those of you who have a significant Amazon Centric business this was very easy access to Capital.

Another ninja tactic I picked up after my meeting with my banker-- Chase will actually refi Amazon term loans, potentially extending the term and lowering rate significantly!

 

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[CareCPA]

Yeah, with RE, they can secure the loan. If you default, they still have a juicy piece of real estate to liquidate.

True, but it was still harder to find one then I expected.
There may also be private money for businesses with no history. Higher interest, but could bridge you the two years until you can go to a "real" bank.

 

[Rivoli]

At most banks, for $150 a year you can open up a business line of credit up to $100,000 without providing financials. All you need is a personal guarantee and good personal credit.

Then, you have $100k sitting for you for whenever you need it.

When you need it, you only pay interest on the amount you take out.

Interest rates are around 7% -- depends on the industry risk and your personal credit score.

Payback is 2% of the outstanding balance per month.

Talk to your local business banker. Line up the capital before you need it. Get ready to scale.

*Warning* Only take on debt when you know you can easily pay it back or need it for a "no-brainer". An example of this would be having customers lined up for your product/service and just taking on debt to service the order.

Where are you seeing this? I have 430k in open sales right now and basically everyone refused me except one place "BlueVine Capital" and I only got 60k with 6% interest....

 

[Flybye]

Ive considered a LOC, but am really scared to borrow money for a business I just opened up to start with debt. Let alone the fact most banks want to see you in business for a few years. My problem was I had several expensive family issues come up which ate into my startup fund. As a result I have been forced to sell a lot of things around the house to try to compensate.

 

[Scot]

Are you actually going into the bank to talk to a banker or are you applying online?

If you are applying online to a faceless drone of course you have no negotiating opportunities as you are not even talking to someone.

If you have any collateral (a home for example) and you go in and talk to someone at your bank with whom you have a mortgage, that's going to increase your chances in a big way.

It may be you have to personally guarantee it or provide some other collateral, but at least you have the opportunity to talk and negotiate.

Chase doesn’t have in house underwriters. I had meetings with the area business liaison and the local branch business banker. The banker actually uses my dressing and is on my diet. Trust me, they were sold. But then LoC gets handed off to a random processor who hands it off to the underwriter. No one that I’m actually able to talk with has any influence on the decision.

I personally guaranteed the LoC. But time in business and revenue were cited as the reasons for denial.

I guess I need to start talking to local banks that only have a couple of branches.

 

[Patrickg]

That's great information.

I opened two new credit cards for this reason because my business is booming but I need more inventory.

Very timely so I will talk to the banker tomorrow. Thanks