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ryanb4614
08-28-2011, 07:33 AM
Hello. I have drawn up my financial cost to startup my business. I would need at least $30k to start. This would include inventory and equipment and backup money. I would be the only employee until I can get the business going. I will be opening a pet supply store. I have been searching for grants but there is nothing out there. I was told that there is a grant for economically depressed areas but I cannot seem to find information on this and if my area I am looking to open would qualify, probably not.
Some issues I believe I will face:
-If I am to open this business I would have to leave my current job
-The money I have to invest is minimal

I have excellent credit score. Have purchased a house within the last year…

Can anyone give me some advice where I can get $30k to start my business? $30k shouldn’t be that hard to get I just don’t know where to begin.

alphadore
08-28-2011, 07:59 AM
Hello. I have drawn up my financial cost to startup my business. I would need at least $30k to start. This would include inventory and equipment and backup money. I would be the only employee until I can get the business going. I will be opening a pet supply store. I have been searching for grants but there is nothing out there. I was told that there is a grant for economically depressed areas but I cannot seem to find information on this and if my area I am looking to open would qualify, probably not.
Some issues I believe I will face:
-If I am to open this business I would have to leave my current job
-The money I have to invest is minimal

I have excellent credit score. Have purchased a house within the last year…

Can anyone give me some advice where I can get $30k to start my business? $30k shouldn’t be that hard to get I just don’t know where to begin.

Hi Ryan, congratulations on your new venture. I hope it will be a successful start-up. Have you approached a bank with your business plan already? That would be a good place to start with.

alphadore
08-28-2011, 08:02 AM
[QUOTE=ryanb4614;52871] Some issues I believe I will face:
--The money I have to invest is minimal
[QUOTE]

I am not very sure what you mean by this. Do you mean your business plan requires more than 30k and you can only raise 30k? Please clarify I dont understand the issue there.


Cheers,
Deniz

Steve B
08-28-2011, 09:05 AM
In all likelihood you will have to borrow money from family/friends, or finance this with a home equity loan or credit cards. I've never heard anyone (here or elsewhere) tell me they ran their business plan by their bank and walked out with a loan. Your venture isn't big enough to get the interest of angel investors or the like.

If you have to leave your job in order to do this - in reality you probably need closer to $120,000. You need to have enough money to live on during the period that you are building up enough customers that the business is finally profitable. You also are likely low on your original estimate of $30,000 because there are always things you haven't accounted for. If I were in your shoes, I would feel like I needed about $150,000 in my pocket before I started a business that required leaving a job. If you can live off a spouse's income during the start-up period, then maybe you only will need $50 or $60k.

Spider
08-28-2011, 09:20 AM
Hello. I have drawn up my financial cost to startup my business. I would need at least $30k to start. This would include inventory and equipment and backup money. I would be the only employee until I can get the business going. I will be opening a pet supply store. I have been searching for grants but there is nothing out there. I was told that there is a grant for economically depressed areas but I cannot seem to find information on this and if my area I am looking to open would qualify, probably not.
Some issues I believe I will face:
-If I am to open this business I would have to leave my current job
-The money I have to invest is minimal
I have excellent credit score. Have purchased a house within the last year
Can anyone give me some advice where I can get $30k to start my business? $30k shouldn’t be that hard to get I just don’t know where to begin.Ryan, I am afraid you are tackling this in totally the wrong way. You are trying to start a business that will not be a business - it will be a job. With the bank as the boss. But banks don't know how to run Pet Supply businesses, nor do they want to.

Your problem is not that you can't find a source for this $30,000 - your problem is that you have not saved enough money. You have a job, you say. So where are the savings from your income? If you haven't been saving, what confidence would a lender have that you will start saving now to repay the loan?

I think you have two options =

Option 1. Start saving at your current job, get another job and work two jobs, save hard until you have enough money to start a business.

Option 2. You want to start a business? You have no money? Then start a business that requires no money to start.

There are numerous choices, including your pet food business. You can buy a few bags of the food and drive around your neighborhood and sell them from the trunk of your car. With the proceeds, buy more food and sell that, then buy more... etc. Eventually you will be able to buy a van and carry more and maybe different brands.

It doesn't cost much to get a magnetic sign for the side of your car saying, "Ryan's' Pet Food Supply." Bingo! You are in business!

You can put the sign on your car at weekends and sell Saturdays and Sundays only and work your regular job (saving as hard as you can) during the week. If you build up a regular route around various neighborhoods, people will get to know you and begin to rely on you. Eventually you will be able to progress to a fixed store, or decide you like the open air and stay mobile. You could expand to a fleet of delivery/sales trucks with employed drivers and even consider turning it into a franchise, over the course of time.

The basic rule of science is also a basic rule of business. If there is more than one solution to a problem, the simplest is the best.

alphadore
08-28-2011, 10:37 AM
In all likelihood you will have to borrow money from family/friends, or finance this with a home equity loan or credit cards. I've never heard anyone (here or elsewhere) tell me they ran their business plan by their bank and walked out with a loan. Your venture isn't big enough to get the interest of angel investors or the like.

If you have to leave your job in order to do this - in reality you probably need closer to $120,000. You need to have enough money to live on during the period that you are building up enough customers that the business is finally profitable. You also are likely low on your original estimate of $30,000 because there are always things you haven't accounted for. If I were in your shoes, I would feel like I needed about $150,000 in my pocket before I started a business that required leaving a job. If you can live off a spouse's income during the start-up period, then maybe you only will need $50 or $60k.

Steve, there are many people financing their ventures through banks. It is not unheard of. I'm not sure why you haven't seen any. There is a lengthy process of evaluation but banks are always open to this option. In a worst case scenario, they would direct you to the private equity department.

Let me share with you my recent experience. A classmate of mine from business school had an idea to convert regular vehicles into armored vehicles in Dubai to export to Afghanistan. He tied up with a major contractor in afghanistan, drafted the business plan, approached Standard Chartered bank for 120000 dollars. Bank showed interest but since my friend is an Expat without any collateral in the country, he was referred to the PE division. Long story short he secured 80000 dollars. I'm not sure about the share holding structure but what matters is that he funded his initial operations. It never hurts to develop relationships with banks. You never know what doors can be opened.

Spider
08-28-2011, 11:29 AM
Deniz, I think you highlighted a major difference - and one that I am constantly pushing in this discussion group. There is a great deal of difference between an automobile factory modifying vehicles to sell to a major importer in another country and selling pet food by the bag to individual pet owners. Even if we were talking about the same amount of money, there is a distinctly different mindset at play here.

One of the parties is thinking big and the other is thinking small. One has to set up a physical structure with real property and equipment and employees, the other is setting up a one-person retail shop with very litttle in the way of physical assets.

I think most banks, even Standard Chartered, would see those two applications very differently, wouldn't they?


Added: Another question - who was the lender in the case of your friend? "Private equity" suggests to me that the bank was handling money for a third party investor. That this wasn't a bank loan as such but an investment from a private entity managed by the bank. Is that the case?

If that is the case, what is the relationship that now exists between the company and the bank and the third party. Does the company have a loan from the bank, to be repaid to the bank? Or does the company have a equity investor who has some say in running the business and may, indeed, be a controlling shareholder?

Steve B
08-28-2011, 12:08 PM
My point is he doesn't a have a prayer to get 30k from a bank in this situation. People selling pet supplies have roughly a 30% mark-up on their products. After paying for overhead and other expenses - there's very little possibility of the venture even being successful let alone being profitable enough to pay back a bank loan. A bank doesn't want 100 bags of dog food as collateral - so they would basically being taking 100% risk on some guy who wants to start a business. There is no way a private investor is going to be interested in this since there is barely going to be enough profit for one owner - let alone two. And, the chances for failure are huge, so an investor will want to trade off the risk for a much higher return on his/her investment than normal.

Setting up a larger operation to service a contract from the Federal Gov't is an immensely different set of facts. The potential profit is probably huge and having a contract in place with (what used to be a very highly rated entity) takes away a significant amount of risk.

alphadore
08-28-2011, 12:48 PM
Added: Another question - who was the lender in the case of your friend? "Private equity" suggests to me that the bank was handling money for a third party investor. That this wasn't a bank loan as such but an investment from a private entity managed by the bank. Is that the case?

If that is the case, what is the relationship that now exists between the company and the bank and the third party. Does the company have a loan from the bank, to be repaid to the bank? Or does the company have a equity investor who has some say in running the business and may, indeed, be a controlling shareholder?

Hi Frederick, there is no lender in this case. The PE division of the bank, funds the venture in return of shares in the company. Basically, any venture capital is part of a private equity. Not every PE is a VC, though. Almost all major commercial banks have their private equity divisions including Standard Chartered, HSBC, and Deutsche Bank. The private equity departments are created as special purpose vehicles. This SPV acquires the loan from the bank and funds the venture. Or, in some cases, they help syndicate the loan for the venture. Although the SPV is part of a particular bank, they can create a syndicated loan amongst multiple banks - if necessary. A recent example to this is the Insan foundation that acquired 4.3m dirhams funding (around 1.2 million dollars) from 4 banks sydicated by HSBC PE. What is the current shareholding structure for my friends company? I am not very sure how many shares were given, nominal value per share, etc. I have to ask him.

alphadore
08-28-2011, 01:05 PM
My point is he doesn't a have a prayer to get 30k from a bank in this situation. People selling pet supplies have roughly a 30% mark-up on their products. After paying for overhead and other expenses - there's very little possibility of the venture even being successful let alone being profitable enough to pay back a bank loan. A bank doesn't want 100 bags of dog food as collateral - so they would basically being taking 100% risk on some guy who wants to start a business. There is no way a private investor is going to be interested in this since there is barely going to be enough profit for one owner - let alone two. And, the chances for failure are huge, so an investor will want to trade off the risk for a much higher return on his/her investment than normal.

Setting up a larger operation to service a contract from the Federal Gov't is an immensely different set of facts. The potential profit is probably huge and having a contract in place with (what used to be a very highly rated entity) takes away a significant amount of risk.

I disagree with almost everything you said in this post. They may or may not have 30% mark up. That doesn't change a thing. Their revenue volume may support this business model with low gross profit margin but higher net profit margin compared to other industries. As far as I can see, you are not an expert in pet supplying industry, nor am I. But I would never judge a company's profitability based on what they sell. Did you know that one of the businesses that have the highest Return on Capital Employed is an exterminator? Then why wouldnt a bank loan to a pet supply business if they are setting up in a good location with good business model and a clever person managing it? I can come up with so many industries that you would be surprised of their profit margins and rate of ROCE.

Why is there no way that a private investor would invest? Why the chances of failure are huge? These are just claims with no support. Do you know how many hundreds of thousands of companies with big brand names are not even profitable? But your small corner shop is. The small corner shop with 2 employees has a higher ROCE than facebook and linkedin.

nealrm
08-28-2011, 01:08 PM
Spider made some good suggestions and comments. There is a book out called "Quitters". It walk through how to go from your current job to being self employed. One of the things it does cover is "Are you ready"

Government grants to start a retail business would be an extremely long short, if even possible. It is better to set this up so that it support itself.

I will add a third option to Spider suggests: Find a retail pet food store and work for them. You will get to learn about the business while you are saving up for your own.

ryanb4614
08-28-2011, 07:45 PM
#1 The pet supply industry is a 50+billion dollar industry. Looks at the facts here: Industry Statistics & Trends (http://www.americanpetproducts.org/press_industrytrends.asp)

You cannot tell me its not profitable. It all comes down to how its ran and how I would manage it.

#2 I asked for steps in securing a loan or a line of credit for around $30k. It will be one year since I graduated college. I have been serving my internship, and I want to venture off on something different then I went to school for in the mean time. Opening a pet supply store is something I always wanted to do. I am just asking for advice in securing the finances.

nealrm
08-28-2011, 09:18 PM
A pet food store could be profitable depending on the market, the amount of competition, management etc...

On the loan side; no home equity, you are a year out of school, your degree is in something other than retail pet food. Tell us - what are you offering to make it worth the risk of lending you money? If you can't tell us what are you going to tell the loan officer or venture capitalist? I don't mean to be hard on you or be negative, but your posts have not supplied us with any assurance that you could pay back the loan. That is what any source of financing will want to know. Once you properly answer that question, you will be able to get the financing.

I suggest that you review the options that Spider and I presented. Also read "Quitters", it is a short book with good ideas.

Spider
08-29-2011, 08:55 AM
#1 The pet supply industry is a 50+billion dollar industry. Looks at the facts here: Industry Statistics & Trends (http://www.americanpetproducts.org/press_industrytrends.asp)
You cannot tell me its not profitable. It all comes down to how its ran and how I would manage it.

#2 I asked for steps in securing a loan or a line of credit for around $30k. It will be one year since I graduated college. I have been serving my internship, and I want to venture off on something different then I went to school for in the mean time. Opening a pet supply store is something I always wanted to do. I am just asking for advice in securing the finances.#1 - The banking industry is an even bigger industry - in the mega-billions - and it got into trouble a couple of years ago - remember that? Banks all around the world are struggling still. The automobile manufacturers are also up there in the mega-billions - they got into trouble, too. Just because an industry is big doesn't mean it is always profitable, and it doesn't mean every company in that industry is profitable. Especially startups.

#2 - You have plenty of advice in this forum about financing a micro-business. If you are going to ignore it all, we are all wasting our time. At this point, I wouldn't lend you $30 because you are demonstrating non-stickability. One year after graduating college (was that a 2-year or 4-year course?) you want to drop what you were studying and try something else. What have you said or done that indicates that you will not change your mind about the pet food business one year from now and walk off having not paid me back?

Steve B
08-29-2011, 08:57 PM
Banks want collateral. Venture capitalists want the opportunity for a much larger than normal rate of return at a risk they consider tolerable. This is just the reality (even before the credit crunch). I don't see either in what I've read. This is similar to the guy that wanted a loan to start a t-shirt printing company. Of course, it could work ... but it just doesn't have enough facts to support it in this case. Unfortunately, the facts actually show the opposite - a person without his/her own capital wants to go into a business that he has no experience in. Selling pet supplies is not a unique idea and has very little chance of supporting one person for the first few years let alone have enough left over to pay an investor.

I'm not saying you shouldn't go forward with your idea - I'm just saying you do not have much chance of getting someone who isn't related to you to give you the money in this case. If you do go forward with your plan - it would be wise to have a LOT more than 30,000 unless you have another source of income to live on for a few years.

Dan Furman
08-29-2011, 11:43 PM
why do these threads always devolve into useless stats and wide-eyed "can SO get the money" and other petty crap? Goodness...

And why is everyone always looking for the money fairy or grants? I agree w/ Steve - he's not likely getting 30k from a bank. Not unless he has rich parents who will co-sign.

Here's how you get the $$$ - use credit cards. If you have decent credit, you could probably secure 20k-30k via credit cards in a week or two. Yes, you are paying a high rate, but if you are confident in your venture, that shouldn't be an issue.

Oh, Alphadore... Steve B does indeed know something about the pet supply business. More than most of us here, I would imagine. Just thought you should know that.

Steve B
08-30-2011, 07:43 AM
Although I don't consider myself an expert by any means, I currently have two pet related businesses that I started myself. One is more of a service (pet fencing) the other is a pet food delivery business. The pet food delivery is only two years old. So far the only people that have made money on that business is my web designer, programmer, accountant, and delivery drivers. No big deal, I didn't plan on making money from it right away. The pet food delivery is unique to our area since nobody else delivers and very few carry quality foods. We service an area of approx. 500,000 people. I also am the leader of a networking group of pet related businesses - we meet monthly to discuss the ups and downs of our business - so I hear a lot of details about several other pet businesses.

Assuming some very rough numbers - this business is going to have to generate around $10,000 per month in sales to just pay the rent, utilities, and minimum wage to a one-person owner/operator. This doesn't include advertising, legal, or accounting services (let's assume he can do everything himself). At approx. $50 per sale (cost of a good bag of dog food), that is 200 transactions per month. Assuming he is open 27 days of the month - that is 7.4 sales per day. That sounds fairly reasonable to me, but it certainly won't happen overnight. It could take many months to develop that much revenue on a regular basis. If our OP is just out of college - perhaps minimum wage for the first year or so isn't such a bad thing. I just want him to be realistic about how much money he really needs to get started and on the likelihood that anyone he isn't related to will lend him money.

When I started 7 years ago - all we were able to get from a bank was a line of credit for $40,000. It was backed up with my personal credit (very high score and lots of equity in a house). So, the bank really took almost zero risk on my well thought out business plan. I also had a MBA and 18 years of business experience when I applied. This was before the banks got into trouble for taking too much risk on their loans and before the economy tanked. I can only imagine it will be even harder now.

Again, just wanting to bring some reality to the often asked question of "I have this great idea and I want to be in business for myself - where do I go for the money?" Unless it's a truly unique idea (i.e. the guy on this board with the new type of drinking cup for kids) it's very difficult to get grants or loans.

Dan Furman
08-30-2011, 11:53 AM
Again, just wanting to bring some reality to the often asked question of "I have this great idea and I want to be in business for myself - where do I go for the money?" Unless it's a truly unique idea (i.e. the guy on this board with the new type of drinking cup for kids) it's very difficult to get grants or loans.

Totally, totally agree.

Here's another thing I have noticed in these threads - very few people want to put their own money into the deal. As in, home equity (like you did), draining their kid's college funds, credit cards, etc. Even the mythical great idea likely took some serious self-funding before any venture capital came in.

Spider
08-30-2011, 12:16 PM
So much of this comes down to "stinkin' thinkin'" (to quote Zig Ziglar.) Variously manifesting itself in scarcity thinking, entitlement thinking, something-for-nothing thinking, "I'm so clever, I'm the only person who ever had this idea" thinking, etc. A total lack of understanding how money works and a bad attitude towards money.

I've seen it stated that 5% of small business failures are because of poor marketing and 95% because of a poor relationship with money. I won't argue the percentages, but I don't imagine that's too far from the truth.

nealrm
08-30-2011, 12:53 PM
Over estimate costs and under estimate income, define before hand what is the drop dead point and make sure that if everything possible does wrong you can still deal with the results.

alphadore
08-31-2011, 04:27 PM
Totally, totally agree.

Here's another thing I have noticed in these threads - very few people want to put their own money into the deal. As in, home equity (like you did), draining their kid's college funds, credit cards, etc. Even the mythical great idea likely took some serious self-funding before any venture capital came in.

I dont think what you are talking about applies to this thread. The person who asked for advise is just graduated out of college and he probably doesnt have any equity built up to this moment.

billbenson
08-31-2011, 08:45 PM
I dont think what you are talking about applies to this thread. The person who asked for advise is just graduated out of college and he probably doesnt have any equity built up to this moment.
You have to remember there are a lot of lurkers on posts. There is a lot of information to be gained by experienced business people as well as people new to business from this thread.

Dee2x
08-31-2011, 09:00 PM
I've done some quick research and according a report bankers use to help evaluate a client's business, the average pet supply store has a 53.4% gross margin and .4% net income. Ryanb4614, you may want to try to get a SBA microloan but it will tough. Traditional banks as well as microlenders have gotten a lot more stringent since 2008. You will need an excellent business plan showing realistic feasibility along with proforma statements. I’m not sure where you are located, so go to SBA.gov and search for microloans. There you will find the requirements and a list of lenders by state. Wishing the best!

Dan Furman
08-31-2011, 10:49 PM
I dont think what you are talking about applies to this thread. The person who asked for advise is just graduated out of college and he probably doesnt have any equity built up to this moment.

Sure it does. That's why I also said "credit cards, etc". The point I was making was that most people looking for money never want to put their own in, or do self-funding via credit available to them/etc.

What, are you saying that someone out of college with good credit can't get a credit card? Or several?

Steve B
08-31-2011, 11:06 PM
Actualy post #1 of this thread said he just bought a house within the last year. I would imagine with the credit precautions that they have stopped loaning money for homes with Zero down, so, presumably, he does have some equity. He also referenced that he had excellent credit.

merx
03-01-2012, 09:03 PM
You could use a website such as Lending Club or Prosper both of which are pere-to-peer lending. Personaly I like Lending Club a little better, I was able to get more from them when I started my business at a lowere rate. I believe the max loan oferedis $25,000. Of course your could always ask friends/relatives for the other $5,000. Another option would be to open lines of credit.

huggytree
03-03-2012, 07:02 PM
if you dont have $30k i dont think the bank is just going to loan you $30k because you want it

do you have $30k in equity in your house? then do a 2nd mortgage

cash in your retirement
borrow from family and friends

thats what people do.....take a risk..

my method would be simple...id save up $30,000....get a 2nd job, work over time....

a suggestion i have also....hire someone to work at your pet store while you keep working your full time job....

it may take years before your business makes a profit....mine took 8 months of part time before it was going good enough to go full time....some businesses never even get to the break even point...by hiring someone else to work the sales counter your taking very little risk....if you quit your full time job and the business fails you could lose everything you have in life.....while if it fails and your still working full time for someone else life will go on...you'll be out $30,000 but life will go on

i always take the conservative approach....take the least risk you need to

KristineS
03-16-2012, 12:37 PM
Sure it does. That's why I also said "credit cards, etc". The point I was making was that most people looking for money never want to put their own in, or do self-funding via credit available to them/etc.

What, are you saying that someone out of college with good credit can't get a credit card? Or several?

This is a good point. A lot of people who want to start a business want to do so with the least risk possible. The problem is that starting a business is all about risk. If you're going to take that risk, go all in. You can't ask someone else to risk their money if you're not willing to risk yours.

sgregory
04-17-2012, 10:37 AM
Another option is researching revolving loan programs that are provided by local economic development agencies. They get this funding through SBA, EDA, USDA to stimulate local communities by providing loans for businesses that need a little help in getting started or expanded. While they don't typically fund an entire project they can fill gaps in financing and make it easier for a bank to get on board. BusinessLoanFunds.com is a directory that shows these programs by county which may help you in getting funding.

Good Luck!

tmerrill
04-19-2012, 08:56 AM
ryanb,

There are plenty of places to get the money you need to start your pet supply store. One place not yet mentioned here is online microfinance. While you can not borrow $30k all at once, you can borrow upwards of $15K from places such as Prosper.com and LendingClub.com if you are in the US, or Zopa.com and RateSetter.com if you are in the UK, or P2P Financial if you are in Canada. If don't live in any of those places, consider selling pet stuff online at first as a means of building up your business. You can get a merchant advance , which is like a loan, to buy inventory from Kabbage.com.

Good luck with your venture. Don't let the naysayers get you down. :)

queenvictoria
04-26-2012, 05:15 PM
ryanb,

There are plenty of places to get the money you need to start your pet supply store. One place not yet mentioned here is online microfinance. While you can not borrow $30k all at once, you can borrow upwards of $15K from places such as Prosper.com and LendingClub.com if you are in the US, or Zopa.com and RateSetter.com if you are in the UK, or P2P Financial if you are in Canada. If don't live in any of those places, consider selling pet stuff online at first as a means of building up your business. You can get a merchant advance , which is like a loan, to buy inventory from Kabbage.com.

Good luck with your venture. Don't let the naysayers get you down. :)

I would have to agree. There are a variety of sites and options for people to get money for their business as well as some good online sources with great ideas. In the end you may need to save money at your current job, borrow money from family members, finance your business using credit cards, or a combination of things.

As far as the industry goes, there aren't a whole lot of safe bets in our current economy, but that doesn't mean that one shouldn't take a risk, especially if that's the area your are interested in. If there were easy answers for industry stability and ways to raise money for potential businesses, nobody would even need this forum :).

The reality is that there are a few different ways to get the money and if your business plan is solid then seeing profits will come with time. Of course there are always risks involved with starting a new business, and the initial seed money is often one of the most difficult steps in the planning process, but you do have options.