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Ever hear of buying aged corporations to establish credit?

Discussion in 'Other Off Topic Forum' started by JimSchad, Jan 8, 2004.

  1. JimSchad

    JimSchad Guest

    Talking to a few people about purchasing a stagnant aged corporation that has been in biz for several years to obtain instant credit and a line of credit. Heard #'s of $50K to $1MM are possible in a short time period by flipping funds between banks.

    Just called Bank of America and they will only do $10K to start with unless you are 2 years old and then up to 10% of annual sales. Point is that ifyou buy aged corp with no revenues then $10K is the limit.

    Any input?

    Here is one guy's opinion on them:
    This is a myth! If you purchase an "aged" corp you will still be personally guranteeing the line of credit and your networth/creditworthiness will be used to determine credit. Only puiblically traded co's (such as IBM etc) are able to have loans in the co. name without a personal gurantor.
     
  2. Schatten

    Schatten F1 World Champ
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    BofA has always informed me that it is the 2 year mark with great marks on the business. Not sure about buying an aged Corp., even if it is small and minute.

    However, if you are looking for just a large credit line, rather than an outright loan to start up the business, you can get a few visas/mc's etc., once the business starts going they'll increase the limits to 20 or even 30K very quickly (at least in my experience).

    what is it that you are looking for? rebuilding credit? large loan? large credit limits?
     
  3. writerguy

    writerguy F1 Veteran

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    I have heard of this but mostly from the RTO or reverse take over route where you find a semi dormant public company that is oooh say an old mining stock and then buy up all the old stock and have it buy your buis to take it public without running too deep into the SEC regulations. Did this with a Tec firm i worked for back in Canada...
     
  4. JimSchad

    JimSchad Guest

    I buy rental props, but til now have done so in my personal name. I recently formed an LLC, but just a few months ago so no real history. I keep having to personally guarantee everything. Trying to get to point of borrowing money in the corp name like a real company. You can't tell me that when Microsoft borrows m oney..if they do...that Bill Gates has to personally guarantee it.

    I have personal credit cards with about 60k available on them, but I have to use their blank checks which expire so not really available at all times.

    Oh would like to have say $250K+ credit line where I cna write a check for a house I want to rehab and not mess with loans or personal funds.
     
  5. JimSchad

    JimSchad Guest

    Jim, you are talking about Reverse Mergers and you are correct. This is apparantly different although similar, but I did mention RM's when I spoke with one guy.
     
  6. Doody

    Doody F1 Veteran

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    this is not a true statement. i have been a founder/officer of a number of companies that certainly were not public and had credit lines not secured by principals/employees/officers/etc.

    ditto equipment lease lines, etc.

    of course the banks will push for it, but at the end of the day they have to put their money to work, and the last time i checked, Microsoft doesn't need to borrow anything ;-)

    doody!

    PS: always consider raising debt as you raise equity.
     
  7. Schatten

    Schatten F1 World Champ
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    I hate to ask a stupid question, but I'd just like a little explaination as to this if you could lend a few minutes to explain. Thanks.
     
  8. JimSchad

    JimSchad Guest

    Doody; I was hoping you would reply! Also, explain your PS statement. I don't understand.

    So how did you get your lines of credit started? When I called BoA I got some ethnic lady with her standard script in front of her and she knew nothing else. I want to be able to walk in and talk to a "REAL" banker who understands how things work.
     
  9. rob lay

    rob lay Administrator
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    Jim, what's the deal with all these business questions you ask on FerrariChat.com? Don't you have some business related websites you can visit? This is a Ferrari website and although some Off Topic is fun and necessary to keep it from the Ferrari areas, I don't think the users that are here for only Off Topic reasons are helping the quality of the community.

    The first 200 business questions were fine, but I think you need to start businesschat.com, now that's a business idea for you! :)
     
  10. JimSchad

    JimSchad Guest

    Also keep in mind that when banks give you a line of credit it is not their money they are loaning. Your signature is a promissory note/asset they book as such against their reserves and Fed account. They get instant credit for your entire credit line even if you dont' use any of it. Their
    reserve ratio goes up and Fed gives them money to loan out. So basically they collect interest on money they never had in the first place. So it is in their best interest to give you all you can handle. They just don't want defaults.
     
  11. JimSchad

    JimSchad Guest

    Well now I feel scolded! I figure guys with Ferraris and who run thier own shows know a bit about more than just ferraris. As Dr. Tax said there is litterally thousands of $$ worth of advice on here.

    I thought off topic was for this type of jabbering?
     
  12. rob lay

    rob lay Administrator
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    Jim, I think you should seriously start something like businesschat.com (although I just checked and it's gone) or entrepreneurialchat.com. Something like FC isn't profitable, but if you could get 100,000 users then it might be. I think you've shown there's a need for talking business ideas and such, that's how FC got started. Your enthusiasm is a needed ingredient for making it successful. Go for it buddy.
     
  13. Doody

    Doody F1 Veteran

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    uh oh - looks like you got rob's irish up, jim! he's close enough to come on over there and slap you upside the head too, so be careful!

    i got my connections to debt sources through a variety of people, primarily (a) investors - individuals and vc firms, (b) my accountants (a large regional firm), and (c) a contract-CFO i had in a company back when - great guy, had taken a few companies public pre-bubble.

    don't call the bank - that's not likely to get you anywhere (as you well know). find out about the business banking group at your bank and set up a f2f meeting with those guys. show up prepared to the gills. pitch 'em like it was your last pitch for your life. if you've been doing this successfully for a while, this will help you get past the fact that the LLC only got put together recently.

    equipment lines are another ball of wax - much easier since there's the equipment to at least partially collateralize the bucks. but that doesn't help you specifically.

    suggestion: get in touch with DrTax. he's in TX. maybe he'll give you an fchat discount rate for help, advice, and the like.

    snatching up $250K properties and rehabbing them is not a novel business. which is to say, it's well-understood. there's got to be dozens of BoA employees in one big TX city alone who do nothing else but loan money to people to do that sort of stuff.

    it sure sounds like nobody's going to give you a quarter-mil unsecured line though. and do you really need it (from the bank's perspective)? my friends who do similar stuff do it a bit more slowly. they let equity appreciate and then leverage A to buy B and then once B is fixed up they move the debt around and pay off the premium properties they think they'll hold long-term (and also happen to be usually be the most valuable, so they can leverage them easily). they do rentals (purchase, fix-up, rent) and are quite successful at it (MA and RI).

    why not sell part of the LLC to raise capital to go off and bootstrap this? raise $500K from angels and start kickin' ass.

    totally random little piece of advice nobody ever told me early on. if you're not profitable, or you're pre-revenue, the best time to raise debt (credit lines, equipment lines, etc.) is as you raise equity (assuming you're raising equity). the venture or angel investors are always happy to have more chins hanging out :) so they'll hook you up with all their buddies - or at least the ones they haven't burned yet ;).

    doody.
     
  14. Schatten

    Schatten F1 World Champ
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    If I'm reading this correctly, basically if you are too cash rich, there will be a lack of interest in extending the credit line (ahead of the bell curve/unprofitable to a bank); reinvesting profits from revenue back into the business to show the need for extended credit. hmmm, I think I'm catching on to this. Of course, when layed out in theory, it all starts to make sense.
     
  15. Doody

    Doody F1 Veteran

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    i wouldn't read it that way. at the point at which a non-profitable or pre-revenue company raises its equity it'll have its maximal cash on hand. the process of raising said equity involves a ton of due-diligence. debt sellers who are linked into a deal by the equity buyers have some substantial due diligence to call upon to make their decision. and usually there are good relationships between the equity buyer (investor) and the debt seller (bank).

    doody.
     
  16. ILuv4Res

    ILuv4Res F1 Veteran
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    Rob, are you lashing out against Jim because of his recent thread in which he was upset that a lot of content is now non-Ferrari related or just because??? (I'm just curious)

    Jim,

    What you're looking for are called 'non-recourse' loans. That is where the lender can only look to the property for security, not to the individual. Those are more common with larger, commercial property loans.

    As an alternative for now, have you thought about a home-equity line of credit? I did one on my house several years back to buy a commercial property cash. It allowed me flexibility due to interest only payments. The interest rate is at prime (currently 4%) so it is at a far lower rate than traditional real estate investment borring costs. Additionally, it allowed me to buy the property quickly, without the usual commerical loan hoops to jump through. Most importantly, I paid it off, then used it again to buy 2 more investment properties. It's almost paid off again for use on the next deal. By the way, the interest you pay may also be tax deductible - bonus!!! Although you're on the hook for the $$, this (in my opinion) is a great way to do it. Especially for rehabbing properties, since if you flip the property you pay off your HELOC, or if you keep the properties you can rehab, season and refinance with traditional financing thereby paying off your HELOC. There's your credit line!!!!
     
  17. shmark

    shmark F1 Rookie

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    Rob, I'm just curious about your reply to this thread. I for one, have asked several business or otherwise non-Ferrari related questions (Off Topic, no?) and have received some wonderful advice here. When you bring lots of people together with a common interest, they are bound to talk about other things they like too. Witness the many "babe" threads. Not that I'm complaining about those. :)

    People in the Ferrari world are generally successful in business and because of the common interest (Ferraris again) are willing to share experiences. I love this site and the Off Topic forum has become one of my favorite things to read. Because of what I'm learning here, I will own a Ferrari sooner than later!

    Mark
     
  18. JimSchad

    JimSchad Guest

    I don't care if stuff is non ferrari related per se. It is the stupid Gary Green questions and the insulting threads and name calling etc.

    Seems with the upgrade of software the IQ of the users has gone down. My opinion is that the older guys are afraid of the new look/feel etc, but the younger kids love it so you get the preschool attitudes I have mentioned.
     
  19. rob lay

    rob lay Administrator
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    I don't do something for nothing, I do have good reasons.

    Jim, why haven't you emailed me back?
     
  20. JimSchad

    JimSchad Guest

    I never saw an email from you. If it went to hotmail it might have gotten scraped off to Junk.
     
  21. rob lay

    rob lay Administrator
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    It wasn't a system generated email, so if it was junking my email, you're loosing many personal emails. Maybe that next big business opportunity. ;)

    ---

    To: jschad01@hotmail.com
    Date: 31 Dec 2003, 11:22:11 AM
    Subject: FC...

    LOL Jim, wow you were really wired up with that post. :)
    I value you as a user, but I can't really learn anything from your post unless you share specifically what was upsetting you. I can try to fix stuff, if I know what it is.

    Thanks,
    rob


    ---

    I do apologize, I thought you were ignoring me the past week.
     
  22. JimSchad

    JimSchad Guest

    I changed my hotmail junk filter level as it was pulling off personal mails that sometimes come through.

    I shouldn't have posted that post I guess, but it was late and my beer muscles were strong. No specific complaints as I am not trying to single anyone out really. Just seems the "quality" of talk has gotten off track. I guess my posting like that doesn't help :)

    Anyway I don't mean to clog up the lines with biz talk, but ALOT of guys on here know ALOT about ALOT. It is like having a sounding board of executives to check with. Somebody always knows something more than I do and I trust the info. I wouldn't put the same trust in camarochat.com. I could just PM certain people I am looking for responses from, but that takes opportunity away from someone else to either add comments or learn.

    I have several real estate sites I frequent too, but they have less of a chat feel and more just raw info....booooring. So I like the instant feedback I get here.

    Thanks.
     
  23. rob lay

    rob lay Administrator
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    OK, I'm cool now, I was busting your chops on this thread because of your 12-31 post. You have to understand my perspective a little...

    - I do everything I can to make this the best Ferrari community I can.
    - When someone complains I take it personally and I do everything I can to take it constructively and learn from it.
    - I was frustrated because you posted 12-31 and it created a huge firestorm, yet you wouldn't post to that thread again or didn't reply to my email (which you never got).

    From my perspective you were just stirring up negativity without sticking by your words and working towards a resolution.

    I don't mind you posting all your business questions, it starts good conversations and there is a body of knowledge with our users that can't be found hardly anywhere else.

    Hardly a community where "This site has become just a sespool of idiots and wannabes." A few yes, but I don't think any more of a % than when FC first started or definitely since we switched software. We just happen to have 3,000 active users now vs. 100 when FC first started or even just 2,200 when we switched software 2 months ago.

    Your post on 12-31 didn’t help our community any.
     
  24. ILuv4Res

    ILuv4Res F1 Veteran
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    Rob, I figured that was the reason you sort-of 'pit-bulled' into Jim.

    FWIW, I REALLY enjoy the off-topic area of F-chat. It is such a pleasure to see such diverse topics combined with the fantastic wealth of knowledge and willingness to share. Thanks for bringing us all together Rob. I don't consider this a sesspool of idiots. Just a few idiots peeing in a perfectly good pool. ;)

    Jim, I also understand the postion of your post. A lot of whining, and pis*ing contests also shows up here. "that's entertianment!!"

    Anyways, getting back to your question Jim, did you see my previous post?
     
  25. Chiaro_Slag

    Chiaro_Slag F1 Veteran

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    Rob - The reason I think F-Chat is great is because you DO take things personally. I can tell you reall care about the quality of the site - Keep up the good work! I hope you never lose the passion. :)
     

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