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Angel Investor Paul Lewis Answers Your Email Questions!

Question:

Me and my wife started a industrial supply in Paso Robles, CA.. From May 2007 to December 2007 our sales were 1.2M. We had a big project at ChevronTexaco in San Ardo, CA.. We netted out the year at 427,000. Now we need some working capital to grow into Bakersfield, CA.. We are a woman owned business. Chevron Oil approched us to become a supplier for their oil leases because they need more women owned vendors. We really need a investor to make this move. Can you give us some guidance?

Troy F.
Fresno, California


Paul's Answer:

Troy,

Rather than take on an investor, you may be better served by 1.) negotiating up front payment terms with Chevron, or, 2.) getting a traditional bank loan based on purchase orders in hand.

1. An often overlooked credit vehicle is your customer. If they are willing to pre-pay you for your products, you may not need any other financing at all. This is the least expensive way to grow as you will not have to part with equity and will not have to pay interest.

2. If Chevron places a large order, immediately bring the purchase requisition to your bank and use it to apply for a loan. Bank financing is cheap these days. You may also want to reach out to your wholesale suppliers and request extended payment terms. They will be motivated to help you grow your business.

I would stay away from an angel investor at this time. It sounds like your margins are healthy and your business is taking off. You just need to work through cash flow which can be done through creative financing as mentioned above.

Good luck!

Paul


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