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Has anyone provided Project Financing to clients?

Discussion in 'Business Management' started by 2CT Media, Sep 10, 2019.

  1. 2CT Media

    2CT Media Very Active Member

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    As the title suggests, we are wondering if we would get an uptick in large project sales.

    We recently decided to move banks and merchant providers, this opens up the opportunity for us to offer project financing for jobs as small as $1000 for either $0 for 90 days or a low-interest rate for up to 3 years. There is little risk for us as the merchant processor writes the loan and our bank underwrites it, but I was wondering if it's even worth the hassle to promote?

    Any one here offer this avenue for clients?
     
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  2. unclebun

    unclebun Very Active Member

    We've not offered it, but ended up giving it when people were slow to pay their bills.
     
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  3. 2CT Media

    2CT Media Very Active Member

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    That's a bit different, but we are dealing with a lot of that right now.

    We are looking at value-adding for our clients as we have found a few smaller fleets or starting companies postpone work due to financial costs. This option would be fully carried by the bank but allow us to work on projects fully paid.
     
  4. equippaint

    equippaint Very Active Member

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    Same principal but not exactly the same. We sell trucks and equipment but quit offering or getting involved in any financing. It's a big time suck because you are the intermediary and generally the people that don't have their own means to pay for things tend to be the ones that have credit issues. You'll be 2 weeks deep in it and the finance co comes back with no and the customer nagging you to find someone else. Or they argue with you about terms that you have no control over. Another thing that happens is some banks get funny about when funds are released. When we bowed out, we would just offer names of credit unions and leasing companies but even stopped doing that because the people could be relentless on both sides of things.
     
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  5. CanuckSigns

    CanuckSigns Very Active Member

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    I can see this happening, you don't want to put yourself in the situation where you are the bad guy because the bank you use won't finance your client due to a credit issue, then you come out looking like the bad guy.

    Also, how would it work if they stop making payments, do you have to go an repo the sign?
     
  6. equippaint

    equippaint Very Active Member

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    Thats what you can become and you also have to be careful with what you say due to privacy laws. The bank may tell you things they are not allowed to and you have to be careful to not convey that to your customer or you both can end up in hot water.
    Youre typically out of it once you're paid. It's possible the bank calls you to remove the sign but there isn't any obligation.
     
  7. perfectpdf

    perfectpdf Member

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    We haven't because our product line would not fit in with that model but the financing model you are talking about I think is great for everyone, you close deals that might have walked away. I think some are a little confused on what you are talking about. It's not self-financing your customer and no you don't become a repo agent, the bank checks the deals not just for credit but for something of value to place a lien on if you default that can also grow interest even when it's not paid. This has been going on for a long time. When you see furniture or insulation companies for example offer it usually the companies offer a discount on the deal or even inflate cost a small % to the bank and the bank creates what appears to be no payments for 12 months for example or %0 interest but it's usually a numbers game between bank and vendor to get them these types of terms. The customer gets financing decisions from the bank usually so no one's emotions get involved and usually people with bad credit are not too shocked with declines.
     
  8. 2CT Media

    2CT Media Very Active Member

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    So more clarity, We would have nothing to do with the financing, the banking institution would handle it all including terms and rates. They would get an answer in about 5 mins after completing the app and there is no hard credit pull until they decide to move forward. We would have no responsibility after completing the work and fulfilling our warranties if any. If the client stops paying it is the banks' responsibility, not ours to handle repercussions on the client.

    The reason we are looking at this option is to entice companies who can't swallow the whole pill but are open to getting the whole project or more and paying for it via financing. There are a lot of times people can't get a working capital loan because they are too young in business but this program could qualify anyone with at least some credit history.
     
  9. equippaint

    equippaint Very Active Member

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    The ones that will take the risky new starts are usually sharks peddling equipment leases. The lenders that call you promoting themselves make it sound great and easy but they are trying to sell their product that has a ton of profit in it. We get calls and emails from these people all of the time, they're annoying twits and I promise you it's a hassle and takes more time than it should.
    If you think that it will help, give it a try, you can always back away if need be. If you're looking for a good outlet to use on more established businesses, hook up with a credit union. They are usually more willing to finance unconventional things.
     
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  10. Gino

    Gino Premium Subscriber

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    Interesting subject, but my question would be somewhat basic..........

    Why would somoene wanna come to you for their finaincing if they would be capable of getting it from their own sources ?? What would make you more enticing then say perhaps, their own lending institution ??

    You mentioned little risk for you, what risk would be possibly yours ??
     
  11. equippaint

    equippaint Very Active Member

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    From my experience, they come looking when they know nobody else will touch them as if you're some sort of magician.
     
    • Agree Agree x 1
  12. premiercolour

    premiercolour A Mutoh, Mimaki dealer for sales and services

    Yep. Customer stopped paying after 2nd month. You can't repossess it on your own because it is technially theirs. To repossess it, we have to go through the court. Above $5,000 in California, we have to hire an attorney. Never again or we just don't sell one.
     
  13. 2CT Media

    2CT Media Very Active Member

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    It's not one of those lenders, This is from our bank (Mountain America FCU) and now merchant processor (First Data) new pilot program.
     
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  14. 2CT Media

    2CT Media Very Active Member

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    Because most people can't get financing for our type of work... You either need to get a working capital loan or have it rolled in to a buildout. Has any of your clients ever tried to finance vehicle wraps? Unless they buy from a fleet company or dealer its next to impossible.

    The risk for us would be a soured relationship with our financial institutions or clients, on the financial side, there is no risk.
     
  15. 2CT Media

    2CT Media Very Active Member

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    Did you finance it yourself or did you have a lender handle the financing?
     
  16. Gino

    Gino Premium Subscriber

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    No, I think I can count on one hand..... other than two customers hitting us with going bankrupt and the others spending beyond their budget.... no one has ever asked us to finance a thing for them. They never expected us to, either. In the very beginning, people would be slow to pay and I felt like a bank, but after I put my foot down and carried a baseball bat, no one has really tried to slight us in 47 years. However, one guy went to jail for 4 years because he f*cked with us.

    Had a collection agency call about a week or so ago, wanting to get all of our delinquent accounts and said they could get 80% of our money back and they'd take a percentage. I said, that's nice, but we have no outstanding collections. He said, no, not you, but your customers. I said, I know. No one at the moment owes us a thing, other than last weeks billings. ................Silence.................. You mean you have no one owing you money at the moment ?? Yes, but we have 10 day terms with our good customers and cash on the barrel head with all others. Oh, so you don't have any large collections ?? Yes, one was recently $26,000. We got the deposit and the balance was paid within about 3 days of completion. It's nothing to have a company pay you within 3 to 5 days regardless of the amount. he said, well congratulations, but I've never heard of anything like that.

    Yep, we like it, too. Thanks for calling and if you need me help collecting, I've switched from a Louisville Slugger 38" to S&W .38. :noway:
     
  17. equippaint

    equippaint Very Active Member

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    You wont be liable for a bank loan that someone else took out. The bank may call and ask you if you could repo it and have everything legally arranged or may ask you if you want to buy whatever it is back but that will be the extent of it.
     
  18. premiercolour

    premiercolour A Mutoh, Mimaki dealer for sales and services

    I would love to work for Gino for free so I can stop putting terms out. Our employees would love Gino as well.
     
  19. premiercolour

    premiercolour A Mutoh, Mimaki dealer for sales and services

    We financed ourself. Biggest mistake.
     
  20. kcollinsdesign

    kcollinsdesign Member

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    I have closed a few deals when the client sought financing. There are lending companies that understand and will consider outdoor plants and electronic displays, and offer realistic terms. They will usually specify the asset, and will only finance objects they can put a lien on (or un-bolt and re-sell, as in the case of a EMC). As signs are considered real property (at least in Illinois), it is illegal to "re-possess" them without the property owner's consent (caution: there may already be liens on the property that would prevent you from reclaiming your property even if the business owner has given you consent), but the lender can place a lien on the property for the value of the sign.

    Signs in general, however, have no value to the bank, so any loan is going to be a personal type loan such as a credit card. I offer credit card payment, but state up front that the merchant fee will be added to the invoice. Normally, I leave that option "switched off" when invoicing from QuickBooks, and only turn it when requested (I have several government agencies and colleges that pay with credit cards, and some buyers want to get their "cash back" on large purchases). One tactic is to assume the buyer will be using a credit card and price accordingly, then offer a discount for check or cash.

    The other piece to this puzzle is credit offered to the client by the sign company. This is common in the industry. Most local customers will pay right up, and it does not take long to develop a sixth sense of who won't. My policy has long been 50% deposit, balance upon completion. I don't extend terms, but 95% will pay within a few days, and some will take 30 days. Those that go past 30 get a phone call; fortunately, for me, it doesn't happen often. Some sign companies have terms on their contract that allow them to collect penalties and interest on late payments; I don't (my contracts are simple), but you may want to consider it.

    More difficult are companies that forward signs for national accounts. Most of them will not pay you until they have been paid, and it can take months to get your money. I have never been completely burned, but I've had to wait. Usually, the terms can be discussed before entering into an agreement with a sign forwarding company. They are expert negotiators, and in many cases are paid by the value of the credit extended to them (and thus are motivated), but you can name your terms (price, generally not time to pay) and walk away from the deal if you don't like it. Just don't be shocked when they take months to pay!
     
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