Case Study: Securing Financing for Business Growth

Several years ago, Tom Curdes, owner of Barron’s Lawn Service, Sylvania, Ohio, decided he wanted to add additional services to his business. Upon researching franchise concepts, he decided the best business opportunity for him was to invest in the Weed Man brand. A 28-percent increase in same-store sales in 2009 and an expansion into the Michigan market resulted in the company adding an addition 600 clients. Knowing that he needed financing for expansion into a new 16,000 square foot facility, Curdes met with five Toledo-area banks. He was able to secure an SBA 504 Loan. The National Bank of Oak Harbor in Toledo financed 50 percent, the SBA financed 40 percent and Curdes financed 10 percent. Landscape and Irrigation recently asked Curdes to discuss his experience and provide tips on how other landscape-industry business owners can successfully secure financing.

L&I: Tell us a little about your business and the process you went through personally when seeking financing?

Curdes: Barron’s Lawn Service and Weed Man specializes in services such as fertilization; weed, grub and mole control; along with lawn maintenance services. Since opening my business over 25 years ago, it has grown substantially since we added a Weed Man franchise to our company mix.

As the business size expanded, our financing needs changed. During strategic planning, we realized that our Line of Credit and loan structures were designed for a company much smaller than ours. Rather than asking to simply raise our Line of Credit, we went to work on using loan calculators to see if there was an advantage to restructuring all of our financing so that we could take advantage of the new current interest rates. As we went through the process of considering our needs for both our present and future needs, it became pretty clear what the best option was for us.

The most important part of the process was the preparation before I even spoke to a bank. I prepared a detailed document that basically demonstrated why I was a good candidate for financing. I met with five separate banks, from which I had the representatives come visit me. I wanted to take them on a tour of our building so that they could experience firsthand what our business is about.

L&I: When you decided to seek financing to grow your business, what were some of your initial concerns?

Curdes: My initial concern was the economy. With the current credit crunch, it was clear to me that I had to do my due diligence and prepare extremely well to not only offer us the necessary financing, but to get banks to compete for my business. My second concern was time. It takes a tremendous amount of time to do this right.

L&I: What are some of the biggest challenges when it comes to acquiring financing for business growth?

Curdes: Educating bankers on our business model is the biggest challenge. They need to understand that we are a recurring revenue model that builds wealth based on the customer list and not on depreciating assets such as equipment and accounts receivable. Again, this is where the preparation comes in. We have to be prepared to tell our story and educate them with supporting documents that highlight our success, such as financial statement.

L&I: What are some of the key questions that business owners should ask of the bankers?

Curdes:

1) What is the bank’s involvement with TARP’s (Troubled Assets Relief Program) money, how much have they received, and how much they have paid back?

2) What are the financing services a bank can offer you and what are the charges associated with them?

You must ask a banker what the risks for repayment are. You must discuss with your banker adding on collateral and guarantees to the terms of your loans.

3) Do you (the banker) understand my reason for seeking financing?

You want the business to comprehend what type of business you’re in and your need for money.

4) Am I borrowing too much or too little money?

Debt is the number one thing you want to avoid. You don’t want to borrow too much money and find yourself in a position where you can’t pay it back. Talk with your banker to figure out what is a reasonable amount to borrow and make sure you also discuss what some of your future borrowing needs may be.