How do you go about getting a huge business loan?

[erifdekciw]

I agree with everything you guys are saying. What I have in mind isn't your typical start up business people go into. The funds would go towards investing in something that would eliminate business costs, while giving me instant revenue boost.

Thats why im wondering if a bank would hear me out. This isn't like opening a donut shop and paying the loan back over like 10 years. I could pay off the loan in probably a year or less. I would even be willing to pay like 20% interest on that money because this is something that isn't going to disappear over night and with that first brick layer down I would invest all my income into expanding. It has potential to be a multi million dollar company. I just need the money to put down that first brick.

 

[Sharksfan]

Feel free to PM me questions.

I have been an owner in three businesses.

One we won't talk about. Another I got bought out from (and no complaints about that...)

The other - which I still do for my "full time" gig - pays too well to give up on and do AM full time yet.

That company is approaching 14 years old - it is consulting based.

Back in 1997-2000 we were ballin'. I seriously couldn't spend the money we were making, and trust me I tried. I had a house, a truck, a Porchse, a boat, a jet ski, and more biatches than I have space to mention.

Then Sept 11 2001 came along - and we were fucked royally. Our business was still sound BUT since we serviced the Fortune 500 every one of our customers had their bottom fall out in the stock market.

Add on top of that a $96,000 check we were owed that we found out we were not getting because a client declared bankruptcy - and suddenly you have panic.

We realized we would have to re-tool to get into a more diverse consulting environment. We hit the SBA up for $500,000 in cash and $250,00 in a line of credit.

One thing you should know - the SBA doesn't do shit really. All they do is guarantee 80% of the loan value of a loan and the bank takes the rest of the risk. You still have to find a bank to actually take that risk for you - all the SBA is doing is telling the bank that if you fail they'll cover 80 percent of the money.

You are thinking - no problem dude, they are only risking 20%. But compare that to a mortgage (this was before the mortgage crisis and all those shenanigans). If you bought a house for $100,000 with zero down -and it was worth that on the market - you could default before the first payment. The bank could repo it and pay the real estate agent fee of 7%. In effect their risk was 7%.

Comparatively SBA loans are 3X as risky even WITH the SBA backing.

What we eventually ended up getting was a cash loan for $150,00 and a line of credit on signed contracts. In short, if we signed a deal we could get 80% up front to cover our costs.

The SBA is a great idea - and a terrible implementation. If you are not a minority - and I have friends of ever possible type, so don't go there - the fact remains that the SBA is SLIGHTLY more likely to help you.

Moral of the story: you can not borrow big money without either a) a proven track record or b) a well endowed (and I am talking dollars not dicks) co-signer.

The end.

 

[cucaloco]

The funds would go towards investing in something that would eliminate business costs, while giving me instant revenue boost.

Why not pay the "business costs" now, and if the model proves successful you'll find a way to get those costs covered. It's a much easier pitch when you say I'm currently making XX,XXX and adding this widget will help me make 2x XX,XXX.

Like others have mentioned, if you have an operational business you can factor receivables (basically companies pay for invoices and cover the time until the client pays you) or get a loan on a equipment/hard assets much easier than seed capital.

Don't think your entitled, or you're going to impress a banker with a laminated business plan template.

 

[erifdekciw]

Oh actually thats what I forgot to mention. This applies to my current work. This isn't something new that im starting that has no revenue, it ties in with what I do now. I have income from the last 2 years that can prove this will work.

In fact my gross income last year was about 150,000 more than the loan amount i would ask for. So its not like im going in there trying to start up a taco bell when all my life I was a carpenter or something. This relates to what i am doing now.

 

[high risk]

you CAN get a convertible note from an angel investor.. and if your gross revenue last year was $700k, you shouldn't have any problem getting a $2-3M pre-money valuation.

this is too small of a deal for a VC or private equity, and too risky (from their perspective) for an SBA-backed loan through a conventional bank.

hit me up on aim if you want

 

[Sharksfan]

One other piece of advice.

If you are putting together a business plan for a loan - make a 1-page executive summary. That's all the decision makers are going to read.

The under-writers will read the fine print - but bank managers/loan officers don't care. They want to know that underwriting has signed off on the loan and that they like the general idea.