funding a new co.

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electricalist

Senior Member
Location
dallas tx
I have a friend who is slowly trying to start his own Electrical Company.
He has a good job now and has been investing in tools and things he will need.
He got a call from a customer he did some work for at another company. The other company s owner retired, so the customer asked if my friend can replace some pole lights.
10 20 ft 2 head type. How does he go about getting this done as far as funding.
Is this a situation where he needs to find a way to buy the lights himself either cash or with a credit line or is this something the customer would need to pay for up front because they would be non returnable..
thanks for any input
 

Dennis Alwon

Moderator
Staff member
Location
Chapel Hill, NC
Occupation
Retired Electrical Contractor
I have never asked for money up front but he can try and ask. Many companies take a long time to pay so that may change things. Since these are special order I think it would be appropriate to get money up front.
 

__dan

Senior Member
Actually, financing a job like that is not the problem. The problem is the assurance of getting paid once the job is done. You could take a signed job contract to a bank and ask for short term financing based on that. They will not touch it, which should tell you something about what the bank is looking for as their assurance they will get paid.

Sadly, there are many businessmen who would think nothing of ordering a new roof top A/C unit to stay in business then skating on the bill, throwing it in the pile of other creditors.

Even having the customer buy the material and giving up on the markup is no assurance, as the customer will be short material which will delay your production schedule and add to your running around for nothing.

The bank would be looking for some kind of secured asset they could attach in order to extend credit. Otherwise, the bank would give you personal credit, like a credit card with a high limit. If you want to talk to the pros on this, I would give Wells Fargo the nod as the most business oriented and savvy pros. You will be talking to business bankers if you talk to Wells.

What you want is the bank's advice about how to secure your payment from the customer. There is no way I could guess what they will say. You have to make this contact and get this straight from them. Then, if they say, 'have the customer come in to sign for our bank letter of credit', you may present this politely and professionally to the customer as their demand and not yours. You need a cheap and painless way to test what is in the customer's pockets and if the customer balks at this first round pass, I would advise running the other way now, while you still have your own money.

Sadly, many business pros will look at a small new contractor as undercapitalized and unable to afford the cost of fighting and waiting for his payment, and naturally take advantage of the situation as an angelfish eats a guppy. These business pros also owe money they can never repay and just spread the pain around.

Bring the bank is as your advisor and see what they say, how can you secure your payment. Get paid, the job is a piece of cake. Don't get paid, not many can recover ever from that loss.
 

John120/240

Senior Member
Location
Olathe, Kansas
Bid High, You can't loose money on a job you don't do (advice from a fellow MH member) People swear by this lady Ellen Rohr " How much should I Charge" or JM Brush "Electrical flat rate pricing "
 

Fulthrotl

~Autocorrect is My Worst Enema.~
I have a friend who is slowly trying to start his own Electrical Company.
He has a good job now and has been investing in tools and things he will need.
He got a call from a customer he did some work for at another company. The other company s owner retired, so the customer asked if my friend can replace some pole lights.
10 20 ft 2 head type. How does he go about getting this done as far as funding.
Is this a situation where he needs to find a way to buy the lights himself either cash or with a credit line or is this something the customer would need to pay for up front because they would be non returnable..
thanks for any input

i'd set up an account with a wholesale house i liked, and have them quote the poles with his markup built in,
and supply the quote for the change showing the poles and labor separate from them.

and as soon as they cut a check for the poles and the poles are ordered, he can schedule the work.

using lithonia LED heads on 25' poles, with nominal markup, those poles are about $40k with tax.
and make sure that preliminary notice is filed to protect the wholesale house in the event of default.
 

JoeyD74

Senior Member
Location
Boston MA
Occupation
Electrical contractor
I wouldn't order the poles until I got payment for them. If it was a returnable part or small cost item, no problem.
there is nothing wrong with getting payment for the poles upfront, if they don't want to do that walk away.
 

Canton

Senior Member
Location
Virginia
Occupation
Electrician
I have a friend who is slowly trying to start his own Electrical Company.
He has a good job now and has been investing in tools and things he will need.
He got a call from a customer he did some work for at another company. The other company s owner retired, so the customer asked if my friend can replace some pole lights.
10 20 ft 2 head type. How does he go about getting this done as far as funding.
Is this a situation where he needs to find a way to buy the lights himself either cash or with a credit line or is this something the customer would need to pay for up front because they would be non returnable..
thanks for any input

Line of Credit with Electrical wholeseller. Around here most contractors secure a signed contract and 50% deposit for the work to be done. Sometimes progress payments are factored in. If a customer objects to a 50% deposit for fear of me running off with the money (has never happend) I remind them that I have a License at stake that the Board will go after.
 
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