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[Biz talk] The shivers


#1

Hi everyone. Well I did it. I actually applied for a loan from the
bank for 35,000 to push my business further. Know that it has been
approved it comes with little conditions. This is where it gets kind
of scary and I know that only other jewellers will be able to help
me. They have asked that my husband co-sign, that is iffy right now.
He is planning on retirement in a couple of years and does not want
any thing over his head. Also they will life insure him but not me
because of medical problems with myself. I cannot find anyone to life
insure me as I rate lower than a bad risk. I am at the point of time
I guess that I either forge ahead with many new places that want my
jewellery (cruise ships, high end gift shops etc) or stay at the
farmers market. My head is swirling and I just don’t know what to do.
The loan is for 5 years and over 800 per month. Does anyone have any
peace for me, do I have cold feet? My butterflies feel like going
down the aisle at my wedding. I am so bad at making decisions like
this, I get scared. HELP

Leslie


#2

Boy, a lot of considerations here.

First to consider is the fact of a loan itself. You’ll be paying in
excess of 13,000 in interest. You have to make that back PLUS a whole
lot more. If you’re using the capital to purchase equipment a long
term loan is OK. If

its for inventory/materials a long term is not advisable. But if its
your only entry into your endeavor you may just have to suck it
up…price of admission, pay to play. You might want to look into
some other mix of capital. Like maybe can you get off the ground with
less $ and then build your business from cashflow? This could be a
better choice because your exposure(risk) is lower so that in the
event things don’t go so well, your debt is lower at a time when
maybe you don’t have the cashflow from the business to service it
without dipping into your personal finances. Will the bank make a
smaller loan without a cosigner? Even if the interest rate is higher
this might be a viable alternative. Perhaps a line of credit would be
better, wherein you get 10,000 (an example only) to start and draw on
the balance of the line only as needed. But if your plans require the
full 35,000 now you may have to bite the bullet.

Scared? That’s a good thing! It’ll keep you on your toes.


#3

Hello Leslie,

I have no business sense. But as my life grows longer and my
remaining time shorter, I have some sense about how my priorities
shift. I don’t want to end up starving in the street, of course, but
the “strictly business” approach to how i spend my time is certainly
a less important consideration than it was years ago.

There are obviously a lot of details in your situation which are not
explained in your query and which are really nobody’s business but
your own - for example, why you can’t get life insurance. However,
reading between lines and guessing at your age and stage of life I
have a pretty strong first reaction. I might ask both yourself and
your husband what sort of life you want to live for the time
remaining to you? Is the most important consideration whether you die
with a bank loan outstanding? Or is it more important for you to
create the things that only you can create. Nobody else can do what
you do. When you are gone that work will never be done by anyone
else.

What is the meaning of your work to you? Is it strictly economic? Are
you dreaming of a big business? You sound like you have good
potential customers lined up; cruise ships et al. So it seems the
worry is not really coming from the economic part of the equation. Is
it that you want more than mere financial return? Does your work have
a message or a unique beauty which you wish to see out in the world
for admiration, appreciation, understanding? Likewise these qualities
reflect upon your personal value as a human being, the jewelry being
merely the vehicle by which these things are both given to your
customers and, hopefully, received by you along with the cash. Maybe
a simpler way of asking these questions is this: Do you simply need
the income or does your work represent personal satisfaction to you?
Is it FUN? Do you LOVE it?

Does your husband have any confidence in your being able to pay the
loan? Has he said as much? If you sell as you expect to sell, there
should be no burden upon him. Would he rather see you remain, in
some sense, unfulfilled rather than to undertake a little economic
risk on your behalf? Does the prospect of that worry prevent him from
supporting your effort? What does he expect to do in his imminent
retirement? Will he want, need, some kind of support or
encouragement from you to do what he wants? Does he have a dream to
follow? Or is he simply going to settle down in front of the telly?
Do you, either one, wish to end your days with a good credit rating
or with some personal joy? Do you talk about this aspect? Do you
think similarly on this?

Don’t worry about the bank. There must be some kind of loan
insurance available. You will, in searching for a way to conform to
the banker’s conditions, meet many young people sitting behind desks,
just doing their jobs, and who will seem to have no heart or soul at
all. They will say and think that they are bound by "the rules."
Certainly they are miserable living and working like that. Don’t
envy them. They will eventually have to face questions similar to
those you are asking. Anyway, “the rules” are always somewhat
flexible if a bit more money can be thrown into the pot by way of a
higher insurance premium or some such consideration. That little bit
extra can be the deciding factor in whether you can secure the loan.
I don’t know what country you are in - Is there some kind of small
business branch of government which tries to help? Have you looked
into that? Do you need to take out the entire amount of the loan all
at once, or can you arrange a line of credit and only take what you
need so your loan payments are smaller, especially at first, and you
can establish some ongoing history and therefore confidence in your
husband’s mind that you can handle the obligation.

Look into yourself. Will owing money cast an entirely different
feeling on your work in your own eyes? Will you still be able to
create and work with pleasure or will you become grimly aware of the
debt driving you on?

You see - I have no real answers. I do have some sense of what it is
to decide whether to live out a dream or to let it die. I say, if at
all possible, follow the path with heart while you can.

best of luck.

Marty in Victoria BC where rumours of Spring are heard from time to
time.


#4

Hi Leslie,

I find anytime I don’t listen to my inner voice I pay the price.

From my perspective (and knowing nothing of your business plan)
this doesn't sound prudent unless you have a solid way to make
sixty $800/mo. payments on your own from NEW income. I would not
ask anybody that could not afford to satisfy my debt, in cash, to
co-sign for me: too many things can happen. 

I don’t know what country you are in (guessing Canada), but if the
US there is talk that Obama will push for SBA loans guaranteed to
90% - up from the previous 85% max. These are at decent interest
rates and terms of 7 to 10 years the last time I checked. This will
be a smokin’ good deal assuming there are banks that still want to
play. I’ve no idea what other countries have to help small
businesses.

At some point, everyone who ever wanted to move to the next level had
to take on some risk. My guess is that you are feeling very iffy
about this because you don’t have a road-map you are comfortable
with. Until and unless you do, I’d hold off.

Good luck,
Pete


#5

Hi Leslie-

I am a jeweler/lapidary but I have also been a commercial banker for
the last 16 years. I don’t know all of your specifics but here are a
few comments:

1- Based on the you provided your interest rate would be
between 13% - 14%. In this rate environment that is very very high.

2- Have you considered getting a Line of Credit instead of a term
loan? I would agree that a term loan is best if you are purchasing
equipment or other long term assets. However, if this loan is for
cash flow, inventory, materials, etc., you should consider the line.
That way you only pay on what you use and it would be interest only
payments. Then when you sell the items you pay the amount you
used…less your profit…back on the line to reduce the balance. An
interest only line of credit fully drawn with a reasonable rate would
only carry a payment of $240 or so.

3- Is this a consumer of commercial loan? This can make a difference
for a variety of reasons.

4- The SBA is coming out with a new product specifically designed for
small businesses working capital needs in this difficult economic
time. It is an unsecured loan up to $35,000.00. It is currently in
the regulatory review stage and should be available in about 60 - 90
days. From what I have seen this will be a streamlined deal…so it
will be approved and closed very quickly. I am sure most people have
heard how time consuming the SBA process can be, but they are using
stimulous money for this program and have amandate to get it out to
businesses quickly. So, this might be something that others might
want to consider as well.

Feel free to contact me off list if you have questions or just want
to review what you have been offered. Good luck. Thanks.

Kevin


#6

The only question I would pose for you to ask yourself is " how
necessary is the loan to achieving my goals?" Can you make a leap
forward, even incrementally, without the big loan? Without knowing
what the money is for, it would be difficult for anyone to advise
you on your choices. Maybe a little more info for the group?

Marianne


#7

Leslie, as you said, you are unable to get life insurance because of
your medical problems, which you had mentioned in your thread about
being accused of wrongdoing by the ‘crazy opal lady’ (my term). I
think the biggest obstacle is that your husband is worried about the
family finances if there is any problem with repaying the loan, due
to health concerns, economic conditions, etc… If you or your
husband needed to pay back the loan out of your savings, instead of
projected jewelry income, would it be an inconvenience, or a major
disaster? I don’t want to keep you from your dreams, but is the
$35,000 really necessary? You don’t need a retail space to sell to
cruise lines, gift shops, etc, and your current shop space is
probably adequate as well. If the money is for promotional expenses,
I doubt that it will ever pay for itself, and if it is for equipment
you should be able to buy used for pennies on the dollar in this
market. If you can give us an idea what the cash would be used for,
I’m sure the members of Orchid can give you a much better idea of the
viability of your future business model. Personally, I am afraid that
the pressure of this loan might make it even harder for you move
forward profitably. I know it would weigh heavy on most of us here!

Lee Cornelius
Vegas Jewelers


#8
There are obviously a lot of details in your situation which are
not explained in your query and which are really nobody's business
but your own

Better advise than I can offer has been posted already. I’ll
paraphrase the first three guidelines of starting a business, though:
Have you held a managerial or supervisory position in your field? Do
you have enough money to survive for one year? And avoid starting out
in debt at all costs. Standard, generic advice, take it or leave
it…


#9

Think this through very carefully. The stress could compromise your
already poor health as well as your marriage. In these unsettled
times, just how badly do you want to do this? I know there will be
Orchid people slamming me for this opinion. But I speak from
experience. 18 months ago I talked my husband into an investment
that I was so sure about coupled with it had always been my burning
desire to do it. Well it hasn’t worked out the way I thought and
every month we have that $800. (coincidently same as yours) payment
to make. My marriage is very much still intact, but I feel so guilty
for doing this to us.

Julia