FINANCING

[chodges]

I need recommendations on financing the purchase of a ShopBot please. I can't use "traditional" financing because I lost my house to foreclosure about 6 months ago (nasty divorce), and I don't have any wealthy friends or relatives.

Any reasonable suggestions would be greatly appreciated!

[richards]

Pre-sell some product. Get a contract with customers to supply them with a fixed minimum amount of product at a fixed price - and be sure that the price is high enough to make a profit. Some of the financial people that I admire require that any capital improvement have a payback of not more than eighteen months and that the portion of each sale that is allocated to capital improvements not be greater than 5%. Using that as a guide, you would need guaranteed sales of not less than $300,000 to justify an expenditure of $15,000.

Bottom line, you either finance things with your own money or you organize a company using other people's money make them partners (and give them voice on your board of directors so that they can protect their investment). Remember that the Shopbot is only part of the 'system' that you'll need. You've got to have space - probably lots of space and other expensive tools (depending on what you're building).

If you're not familiar with break-even analysis, and don't have a spreadsheet program, download Open Office (which is free), and simulate a business plan to see just how much product you're going to have to manufacture to make your business plan work. THEN, go out and pre-sell product. Just like a typewriter does not a novelist make, neither does a CNC router a manufacturing plant make. All too often, I've gotten myself in a mess because I wanted 'something' that I didn't 'need' to do a job - and I wasn't willing to what it took to make the new tool a necessity.

If you haven't used a Shopbot before, you might consider buying time on another machine to test your ideas before jumping in. This isn't an indictment against Shopbot; they have a great tool. But surely you're aware of the high percentage of new businesses that never make it past the first year or two. In my opinion, a solid business plan should come long before any tools are purchased.

[chodges]

Thanks Mike!

I probably should have added that I own a fairly large sign company (in business since 1947), and we already have sufficient orders to justify the payments. I just can't seem to borrow the money right now.

[richards]

Charlie,
I think the same rules apply. A banker, who is hesitant to lend money on a machine, is more likely to lend money against guarenteed sales. In other words, he would be banking on your customers' ability to pay rather than on your own. When a banker won't lend me money, I really listen to learn what I need to correct to be considered a good risk. Sometimes it's simply that the bank's policy is to lend on cars and homes, but not on equipment - which means that you need another bank. Sometimes it's the numbers. That is a problem that has to be corrected either by waiting until money is available or by bringing new money into the business via a partner or by issuing stock.

[rcnewcomb]

Get a part time job delivering pizzas for a year and then pay cash. I did and I have no regrets.

[brian_h]

I had an empty business credit card sitting around. I called them up and they offered me 5.9% on a balance transfer until paid in full. I put the alpha/spindle on there and set it up for automatic payment out of my bank account. I bought the bot and a new Dell this last summer. My payments right now are about $300, and will decrease as time goes by. This is the *one* instance where I think leaving a balance on a CC is OK. This may or may not help you. If you do have an empty card (that you don't plan on touching for anything else) give them a call and ask about negotiating interest rates on balance transfers.

[myxpykalix]

Randall, that might be sound advice but you forget the most primal thing that drives us boys with our toys is..."I want what I want when I want it"

[harryball]

"Get a part time job delivering pizzas for a year and then pay cash. I did and I have no regrets."

Not a popular answer... but I firmly believe borrowers are slaves to the lender. Bravo and good for you! I worked hard as well, paid cash, no regrets.

As I go through our dry spell for the next 2 months knowing I have no payments due... it really gets the monkey off my back and leaves me free to enjoy making stuff.

I appreciate every last piece of equipment I have and can tell you what I did to make the cash to purchase each one.

Robert

[scottj]

Hi Charlie,
Have you considered a leasing company? We have worked with several companies that were able to get financing for customers who otherwise could not get a loan. Contact me at shopbot and I can give you a list of these companies that we have dealt with.

Scott Julian
ShopBot Tools