Getting Bank Loan Funding-Cabinet shop financing tips
Small business loans are tough for cabinet manufactures to get during the shop start up stages. The bank will not take high risks with a small shop. Financial institutions are intensely reluctant to offer long-term loans to small firms just starting out.
I’m going to offer some solutions to this problem though.
Because most new businesses do not have any equity established there is nothing to secure the money that the cabinet company entrepreneur wants to borrow on a long term basis. Thus, banking institutions shun loaning money to start-up companies in this manner. Their principal role has been as a short-term lender offering demand loans, seasonal lines of credit, and single-purpose loans for machinery and equipment.
Preparation for submitting a Loan Application
When you are beginning your company, you must structure a cabinet shop business plan. By visiting the SBA (Small Business Administration) in your area you can establish a relationship with a counselor. The people who volunteer their time at the SBA are successful business men and women who can help you put together a business plan that will help in many ways.
A Solution to the Problem
There’s a way to get around this obstacle of long-term loan rejection. If you have friends, relatives, employees, customers or perhaps industry colleagues who would be willing to co-sign for a long term loan using established equity in something they own, this could be the answer to your problem.
A Troubling but Necessary Personal Guarantee
What I am about to share becomes a burden for most borrowers, but oftentimes is a necessity for getting extra working capital. Because the new cabinet company/corporation does not have any solid assets to back the loan requested, cabinet shop lenders commonly require the borrower’s personal guarantees in case of default. This ensures that the borrower has a sufficient interest invested in the credit extended by the bank to give attention to the business. It almost voids the protection that one finds in establishing a corporation to protect their personal assets if the business fails.
An Alternative to Getting a Loan from a Banking Institution
Connecting with Venture Capitalists is another option that could be considered. This is going to require putting together a strong cabinet shop business plan. https://fixmycabinet.com/2009/05/21/business-plan-setting-up-small-cabinet-shop/ Generally your company needs to have been established for five years and be displaying the capabilities of becoming a regional or national landmark returning high profits.
Tip: Finding a general contractor in your area, who is looking for an exclusive cabinet company to fabricate and install all of their custom kitchens or bathroom vanities, is a possible place where there may be some good start-up capital to be found. Especially if they have the building projects already sold to guarantee that your company will have the funds to repay the loan. They would set up a draw system that would automatically come from the proceeds that their company would be due to pay you for your services. In a case such as this, you must establish your sales prices upfront and have a written agreement that they are willing to pay the prices that you have established for the cost of your goods and services. If you do not protect yourself, you will be at the mercy of your lender and at risk of getting squeezed to lower your bids.
Learning how to get a small business loan for your cabinet company is going to require a high level of research and focused effort to accomplish the passionate goals that are inside your heart for succeeding. Bank funding for your cabinetry shop may very well require taking some financing risks that could reflect heavily on your personal life. Proceed with a planned purpose, caution, persistence and patients.