Multi-Shop Operators (MSO)

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How to get the financing needed to expand your business

Friday, July 1, 2016 - 06:00
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Fortunately for most MSOs, getting financing for growth doesn’t involve groveling before a greedy banker named “Mr. Potter” as George Bailey did in It’s a Wonderful Life. On the other hand, it’s also not as easy as yelling, “Show me the money,” into a phone as the title character did in the 1996 film Jerry Maguire.

So how do MSOs get the financing they need to acquire or build new locations and build their business? A handful of MSO owners shared their financing stories and advice.

Prepare before you approach the bank

Chad Smith of Smith Bros. Collision Centers, which opened the first of its three locations in Mississippi in 2000, said he sees three steps to getting financing for growth, all of which should be done well in advance of adding another shop. The first step, he said, is planning for growth.

“One of the biggest things you need to do is decide in advance if you’re going to expand to multiple locations, because if you don’t plan for it, it’s almost impossible,” he said.

The next thing, he said, is to be financially solvent and have accurate business financial records that reflect it.

“Take care of your books the correct way,” he said. “If you don’t have accurate financials and a good balance sheet that shows that you’re solvent and liquid, the bank is not going to spend any time with you. And don’t splurge on your cash so you have some reserves when the time comes or an opportunity to grow arises. You’ll want to have some cash to put toward any deal.”

Smith said his company relied on bank financing when it purchased a second location in 2004 and a third location just last fall. Those acquisitions required the third step needed well ahead of that growth: building a relationship with your bank.

“You want them to know you when you go in and say, ‘Look, I have this opportunity; you know me, and you know my numbers. What can you do?’” Smith said. “If you do those steps, you’ll have banks competing with one another for your business. We’ve seen that. We’ve had it come down to banks competing to try to get the opportunity to fund our expansions.”

Smith said he looked into Small Business Administration-backed loans, but found it too restrictive.

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