It’s very common, especially in manufacturing, to get your business to a place where you simply cannot grow without a line of credit or an investor. The problem is that when you are in that space of not being too profitable, but needing money, it’s difficult to get a bank line of credit, especially in the current climate. I often see in my practice that people do not want to give an investor part of their company because the owner has worked so hard to build it from scratch.Here are a few things you need to know, before you grow!
You can’t do it alone.
In this type of atmosphere, where you are required to keep your product on the shelf, and prepay those expenses, but have to wait 90 days to get paid, you need financing. Unless you have the means to finance yourself, which most business owners don’t, you are going to need help from the outside.
Don’t allow your ego to get in the way here, because you your investor or the banks money is key to your distribution level.
It’s better to share millions than keep nothing.
I’ve seen many companies struggle for years, because they did not want to share the profits. They continue to stagnate and never get to their goal.
It’s true that most investors, knowing that you don’t qualify for a line of credit, will want as much as 25%. They are, after all, taking a risk. The truth is that their money will keep your product going, and the potential to share much more money is better than staying where you are now.
Real Estate Deals.
Real Estate is another sticky subject. Typically you have one partner that is working and the other is financing. The partner that is working always feels that they are doing more than the financer, but the truth is that you don’t have a real estate deal without money and borrowing power.
It takes both parties to make this work.
Sign the papers!
Always sign papers showing your agreements and also talk through them verbally. Make sure you both know the other person’s expectations.
If you take the time to do this and put it in paper, you can avoid all kinds of issues, arguments, or even a the dissolution of the company.