It takes money to make money, so these tips are designed to help you have more cashflow, and leverage more capital if you need it. There are 2 types stores, either you have a garage sale store of random stuff, or a more commercial style store with replenishables. Regardless of what store you pick, eventually you might need money. You don’t have to use it, but if you’ve been a reseller for any length of time, you know there will be opportunities that may require a larger amount of money. The worst time to ask for money is when you need it.
1. Lower the risk of your category. It’s much less risky to invest in companies that are in great categories.
You could lower the risk of your category by buying stuff that you can return. Research 30,60,90 day return policies and take advantage as you are starting. Nike has an unofficial return policy. I consider inventory that’s hard to get rid of more risky. Used cheap stuff for $1, sometimes doesn’t even sell for $1. It also costs a lot to list cheap items. No one ever said, how am I going to get rid of all these MacBooks. I sold a $410,000 Lexus LFA, and the trade-in was a 1984 Lamborghini Countach. My boss was like, “damn, that’s ridiculously risky, there’s a few other ones, and they’ve been for sale for a long time. I don’t want to park $80k there, can you help him sell it somewhere else?” On the flip side, we’ve paid $10k for a Corolla that we’re flipping for $11k. Literally thousands of people in our local area are looking for that car versus almost no one looking for a questionably operational Countach.
2. You’re not asking for enough money on your items. You’re not asking enough money on a loan.
For higher quality buyers, the cost of saving money on a questionable item isn’t worth it. eBay might be cheaper, but the quality control isn’t as high as Amazon. Aim for items where convenience matters. I offer 1 day shipping on many of my items for an extra $20. It’s not something people pick, but because of left-hand navigation, some people will get rid of items that have slow shipping.
It sounds counter-intuitive, but often, the more money you ask for, the more likely you are to obtain a bank loan. For banks, small loans (under $100,000) are just not worth it. This is why you see small stores and huge stores. They want to fund huge amounts of money because they make money when they lend it.
How much capital do you need to build your dream store? I recommend you have the amount that you want to make each year in reserve. If you have a $100k, you can flip $100k 10x for 10% each month, or you can flip it one time for 100% return. Each model is different and needs different amounts of money.
3. Spend More Time In One Industry Doing One Way of Business (Banks Love This)
The biggest indicator of how well you’ll do in a business is how long you’ve been doing business. If your business is relatively new, you may not have built up enough of a business credit history to qualify for a small business loan. Note that vendors don’t always report your payments to the business credit agencies automatically. Whenever you set up an account with a new supplier or other vendor, make sure they report your payments so your business can build up a good credit history.
it’s easier to have a successful business and solid financials if you’re smaller, clarity is better than size.
4. You don’t have enough collateral. (No skin in the game.)
Brick and Mortar, Warehouse, House, Car, Investments. People/banks/distributors like working with people who are super invested. Team up with people with these resources.
5. Not enough evidence of strong cash flow
Stronger cash flow gives you more options. My business is getting smaller and smaller, and I’m getting my money back faster and faster. I’d rather have more cycles than higher margins, personally, but it’s a lot less profitable. This is why I don’t allow best offer, because I want immediate payment.
6. Incomplete descriptions. Poor application/paperwork for banks.
Sadly, one of the most common reasons items don’t sell is incomplete descriptions and item specifics. eBay is trying to standardize data, so it’s more important than ever to fill out every single box.
I’m from the car business, and a bank will decline a loan, whether it’s for a small business or a car because of paperwork. Business owners can spend up to 20-30 hours writing the description and taking photos for a single item.
Would someone buy your business. Do you have three to five years of business and personal tax returns, business bank account statements, financial statement/projections for the business, and your personal and business credit reports. They may also want to see legal documents related to your business such as contracts, leases, licenses, permits, and corporate documents. There’s a lot to it, but that makes it even sweeter when you pull it off.
7 & 8: Work on your credit score Your debt utilization is too high (or not high enough). I am not a credit expert, my score is only a 769, there’s a lot of people with a much higher score that you can follow, but here are some basic rules. I actually have 2 late payment in the last 7 years, and that’s preventing me from having over 800.
One of the most common reasons for loan rejection is if the lender deems your credit score to be “too low.” The magic score number will differ depending on the lender and situation. Your personal credit score does factor into a small business loan, even if your company has been in business for a while. If you can’t manage your personal credit, the logic goes, how reliable will you be when it comes to paying back a business loan?
If a low credit score is the reason you are turned down, review your score and take steps to repair it. It’s a good idea to brush up on what goes in to your personal and business credit score, too, so you understand how you are being evaluated. If you have a successful business, but had to damage your personal credit to build it, you’re not alone. Take heart: there are more options out there for you than ever before.
< 30 percent of the total credit available to you is good
<10 percent is even better, and actually for me personally, having 0 utilization has given me the highest score.
You want to ask for a higher limit and lower how much you’re using.
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