Small Business Financial Advice

Discussion in 'Growing and Managing a Business' started by hammersforhire, Jan 6, 2010.

  1. hammersforhire

    hammersforhire
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    I have a small business in the construction field that my business partner and I started 11 years ago. Since the down turn in the economy we have had struggles to pay debts on time. Most of the debts that we have are signature loans, lines of credit or credit cards. My average interest rate is around 25% right now. I am trying to find someone that is in a similar situation that might offer some advise. We do not want to close the business and feel that there is a good solution out there.

    Russ
     
  2. Fergal

    Fergal
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    Hi Russ, I've experience in the construction industry myself and I'm very sorry to hear about your difficulties. I know from personal experience how difficult the construction industry is during these challenging economic times.

    An interest rate of 25% is extraordinarily high and I'd suggest that you need to take urgent action to try and reduce the interest you are paying. Have you spoken to your lenders yet? It is not in their best interest to charge you such a high interest rate. If the high rates were to force you out of business, your lenders would receive a lot less, than if they were to make a fair arrangement with you and reduce the interest rate to a level that would allow the business to survive.

    What country is your business based in?

    If you can please post back with your thoughts we will do our best to advise you and point you in the right direction.

    Also, if you can please post back with just a little background info on the type of construction work your company does, we will do our best to offer some suggestions as to how you can find work and increase your revenues.
     
  3. hammersforhire

    hammersforhire
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    Thanks for the reply. My company is based in the United States in Colorado Springs Colorado. I have talked to most of the lenders and they are telling me that if I can pay on time for 6 months they can reduce the interest rate back down. The only problem with this is that now I am paying on average about $1000 - $1500 a month more in interst alone. This makes it really hard to make the payment at all. My company mainly does residential remodeling.

    Thanks Russ
     
  4. Fergal

    Fergal
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    Personally I would tell them that an interest rate of 25% is extortionate and that if they not agree to significantly reduce it now that you will be out of business before the six months are up.

    If they understand that you could go out of business they will realise that there is a real danger that they won't get paid anything. Hence, they should be a lot more a agreeable to fair and reasonable payment terms.

    How is the residential remodelling business? Have you got plenty of work on? Have you been forced to reduce your prices?
     
  5. hammersforhire

    hammersforhire
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    Right now the work is coming in but very slowly. With the influx of new remodeling companies that used to be employees of home building companies it has created a very competative market. We have dropped our prices about 15%. I feel that if we do not do this reduction we will not get any work. I really feel that this year there will be a spike in the residential remodeling industry. We have decreased our overhead so much that if and when the market does come bacK I think that we will be on top.
     
  6. Fergal

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    Hammersforhire, have you tried any of the following to promote your business to your target market;


    1. Advertising in local newspapers, even cheap classified ads could help you to get your name out to your target market
    2. Listings in local business directories
    3. Attending and or displaying at relevant exhibitions in your local area
    4. Doing leaflet drops to neighbourhoods that you feel would be most likely to use your services?
    We'd be happy to give you some feedback and suggestions on your ad copy / text, if that would be of any help to you.
     
  7. seanstevens

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    Regarding your debt issues you need to find the balance between paying of the debts, being able to afford the payments and protecting your credit score.

    It would be worth contacting your creditors again and explain to them that the interest rates they are charging on the loans/cards are now starting to do damage to your company and you are struggling to keep up with the repayments. Out of interest (you don't have to put names) but are the debts with mainstream card companies/banks? If they are with these types then they should be more reasonable (when you speak to them don't just speak to the call centres, ask to speak directly to the credit managers who will have more understanding of the situation and won't just be talking to you from a script).

    I'm not a fan of debt consolidation and believe most of the companies that do this type of work are dishonest and just prey on peoples worries to earn themselves some money, however, I would not totally rule it out in this case if the credit/banks are refusing to lower their interest rates. If you ever go for one of these companies speak to 3 or 4 four of them before making any decision as you need to ask some serious questions about potential issues with your credit score.

    As for getting new business, you probably know your area better than me, but Fergal has made some good suggestions above. The only thing I can think of is trying to find any business parks in the area where you could make a pitch to the owners or current maintenance company that you could work on a retainer. I.e. For a small yearly fee (something like $1,000) you will be available for them for a year and all work will be carried out at discount. You are in construction, but do you also do painting etc (forgive me, I know nothing about this field), but if so, this is also something that could be advertised as a seperate product to businesses and business parks.

    If you can split products or add a little extra (such as painting if you don't already) then you have a chance of reaching a wider audience who may then need some construction at a later date.

    I wish you all the best.
     

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