Who will cough up the Green??

[OzoneOwner]

OK Here goes, I've been engineering a a local studio 5 years now. I'm tired of working for the man, so I got out. Now, I have 100's of clients in the market & I'm ready to go solo. My question is this: To all you owner/operators out there, where did you get financing for your business?

I'm doing the formal business plan and going to beg the banks for money, but I'm concerned they'll laugh me outta there when I tell them I need 50k+ to get going. I'm planning on running an HD2 rig with a couple 192's and a Control 24. Add to that some nice fat pre's, mics, cables & hardware and the dollars really add up (duh!).

Is equipment leasing the way to go? Any input would be GREATLY appreciated!! [img]images/icons/smile.gif[/img]

[The Eggman]

Originally posted by OzoneOwner:
OK Here goes, I've been engineering a a local studio 5 years now. I'm tired of working for the man, so I got out. Now, I have 100's of clients in the market & I'm ready to go solo. My question is this: To all you owner/operators out there, where did you get financing for your business?

I'm doing the formal business plan and going to beg the banks for money, but I'm concerned they'll laugh me outta there when I tell them I need 50k+ to get going. I'm planning on running an HD2 rig with a couple 192's and a Control 24. Add to that some nice fat pre's, mics, cables & hardware and the dollars really add up (duh!).

Is equipment leasing the way to go? Any input would be GREATLY appreciated!! [img]images/icons/smile.gif[/img]

<font size="2" face="Verdana, Arial">How many years will it take you to pay the loan back? What will your monthly payments be?

[tubajay]

FWIW,

It's great to have financing as an option, but you have to be able to service your debtload - that is what the banks are going to look at. Figure out how many billable hrs. you will need at your projected rate to see if it equates: if $50000 on a 4 yr lease works out to $1500/month, and you still need facility rental, O&M, mortgage/children, etc, do the math. You will soon realize that you might not be able to service your debtload without guaranteeing 40 billable hrs/week, and that isn't realistic to start out...

It took me YEARS to pay off a modest recording studio, but then again, I knew that from the get go, however, the last year of work paid off all the debt (yes, i am DEBT FREE!) so let that attest that you can do it, but it took 4 years, and then you will face another hurdle - changing technology, and obsolesence. Unless you want to stay on the bleeding edge of technology, start small, pay off your investments, and move up the rungs like the rest of the working independents. Rent what you don't need daily (Neumann mic's - lush pre's, etc) and own the tools you will need daily to do your chores.

Good luck,

Jay
PlugHead Productions

[Paul Turpin]

Its quite simple. You either need $50,000 of collateral to put up against the loan or a co-signer who does. And generally - the gear you're getting doesn't count - the Bank doesn't want to re-sell high-tech or vintage gear that they don't understand. They want real-estate / cars - in a word - assets. If you can't get this to happen. You may need to work for the man again until you can SAVE $50,000. Or find an investor who believes in you.

[Kenny Gioia]

This is what I would do.

(Keep in mind: I never want to be in the recording studio business. I've been lucky enuff to be in the Production business, but that's another post)

I would convince all of your clients to record in some already established studios, with you as the Producer or Engineer. They'll need to pay a bit more for this luxury which you can get paid thru the studios you work out of.

Now you're making money with 0 overhead.

Slowly save your money and buy some gear. (Pro Tools Rig)

Now convince some of those clients to do some editing at your studio while relying on the big studios for eveything else.

Slowly but surely keep adding on until you have built a studio where you don't need to keep going outside.

And if you're really good, you'll realize that you don't need your own studio to make money in this business.

Anybody can buy gear. People pay big money for good Producers, while good studios always have to compete with others in the area keeping prices lower than profitable.

Just my 2 pennies

[froyo]

Hello. As was stated above, unless you have the money or someone who does co-signing the application, a bank won't even give you a lollipop. But there are other options (mob loansharks for one). There is venture capital and the federal/state government. They all have major caveats however.

Venture capital. If you get humongously lucky, you could theoretically find an investor or group of investors who could front you the money to start up and have a working capital for 6 months to a year. However, they would own part or most of your company, so you would be back again to 'working for the man' so to speak. And that's just assuming you could convince anyone in this economy to fork any money for what may be perceived as a 'tech' venture.

Then there is the government. The SBA has many programs for people who need help. However, they will not give you seed money to start a business. Mostly what they do is guarantee loans that have been denied by banks through the regular channels and procedures. So, you go to one or two banks, they turn you down, you then ask the SBA, who looks at your paperwork and then decides if they want any part of it. However, they will NOT give you seed money to start a business from scratch. Nobody outside of venture capital (or friends or family) will do that. Banks and the SBA want to see that you are spending your own hard earned money before they will even sit down with you. The way they figure, if you want them to give you money for your business, you should at the very least plunk down some of your own into it. Otherwise, they think, if it's not trustworthy enough for you to risk your money, why should they. Every case is different, but these are general 'rules'.

The SBA does however have some other options. Most important to your situation, they have a program called a Microlan. This is a different beast. This is the closest thing to seed money that's out there. It has a $25K maximum limit however. It's a lot more flexible as to it's requirements for approval. They won't shell it out for anyone, but they are a lot more open minded and flexible.

So your situation as I see it, gets replayed a million times over everywhere, everyday in all industries. Before anyone (outside of the forementioned friends or family) is willing to give you one penny, they need some assurance that they will get their money back. For this, you need either collateral or a proven track record. And a proven track record is one of those rock/ hard place situations. How can you have a track record if you have no capital to get on track; kind of like applying for a job fresh out of college. They only want experienced people, but you can't get experience until you get a job.

The bottom line is you need to run your business for a while before anyone will give you money for it. You have to decide for yourself how to do that. You can spend your savings, maybe get a 2nd mortgage, hit up family or friends, etc. Or do as was suggested above, run your business with no gear of your own for a while. You can work out deals with other studios to get better rates; they will often give engineers or producers better rates than regular clients. As time goes by, you can slowly build up your own gear and rely less and less on other studios.

I hope this helps. Starting your own business sounds a lot simpler than it is. It's a humongous undertaking with overwhelming risks that when it works out has overwhelming rewards, monetary and otherwise. Good luck.

www.sba.gov
www.cfda.gov

[techdude]

Inspiring posts. I would add
www.score.org
At a local chapter you can present your business plan to a retired banker, or CEO. Selling it to the executives helped me sell it to myself. I got great accounting info there, like the real cost advantages of leasing vs. a loan.
The mobility mentioned earlier can increase revenue possibilities- not only will it travel between great sounding tracking and mixing rooms (which you will not have to build) but it can be rented-out if you are able to swing a holiday now and then.
Mike