Business loans…

[Brendan Coots]

My brother and I started our production company about 5 years ago with $5,000 cash, a Panasonic dvx100a and that’s about it. We’ve never borrowed a dime from any outside source, have been in the black since closing out our first year, and have doubled our revenue every year since opening our doors five years ago. We’re lean and frugal and have learned to make more with less, and I’m supremely thankful for that now when I see our profit margins.

You don’t need $110,000 worth of gear to start a production company, especially if it’s a smaller, non-broadcast niche. You just don’t. For post, get two mac pros with FCP/Adobe products, and you’re looking at $15,000. Rather than buy, rent your video gear on a shoot-by-shoot basis. Think this sounds silly? So does going bankrupt while sitting on a pile of pretty gear that, like all technology products, is worth half what you paid for it.

You also don’t need $50,000 worth of advertising, building space, pencils, phones etc. You can, contrary to the egoncentric’s guide to start-up mythology, start smaller and grow once your revenue proves you’ve earned the right.

In fact, the more you borrow and spend now, the less likely you will survive beyond year two as a company, because you completely lose the ability to weather slow months. And trust me, you WILL be weathering some slow months – not just because of the sagging (crashing) economy, but because it takes a few years for any production company to get really established and keep the phones ringing. Even after a few years, slow times are part of the production game.
No doom and gloom here, but seriously – you do not want to find yourself choosing whether to pay your rent/employees OR pay the many thousands of dollars to service your various loans. The fancy workstations you lease will always be a financial noose in slow times – drawing no income, large monthly debt payments, total inability to sell them in a real pinch. It’s almost like having an adjustable rate mortgage loan in today’s real estate market.

What you DO need, as Ron pointed out, is a willingness to do anything it takes to make it happen, and it would be wise to at least consider working with the money and resources you already have, aka bootstrap it. For the record, 90% of Fortune 500 companies were started with little or no outside funding.

Brendan Coots
Splitvision Digital
http://www.splitvisiondigital.com

[Steve Kownacki]

Hmmmm…
YOU are your biggest overhead. Make sure you have AT LEAST 3 months of salary saved and AT LEAST 3 months of business overhead in cash. Also have AT LEAST 3 months of personal savings for backup. Better to make it 6 months. If this sounds tough, this is what the bank is looking for. They don’t take unnecessary risk. So if you want to take home $5K a month, have $30K+ in a money market.

17 years ago we got a loan with only the equipment as collateral – that was handy.

And I totally agree with Brendan about renting gear. At times I think it sounds expensive, but not having payments or upkeep is a good thing.

Steve

Steve

Being rich has nothing to do with wealth.

[Grinner Hester]

Credit a great business plan and a tie is the norm.
That said, don’t do it. Debt being your biggest foe in business, I have found it best to side step it.
Truth is, a loan is not required to move into a commercial building. You’re talking furniture and that’s just a matter of selecting the right garage sales.
I speant just over 10k moving into my building and pimping it accordingly. When I got tired of the stress/overhead, I literally sold all that stuff for around 600 bucks.
Now it’s just me, my camera and my edit suite. If a booking doesn’t happen, that’s a cool day off. I did not have that luxury with a phat overhead.
If you must stretch your wings, do it without a banker.