| The scrap metal business is tough for dealers and | | | | and will also want to see that you have a suitable |
| agents. When they order scrap for clients they | | | | amount of assets or collateral that they can |
| have to wait around one month before it arrives | | | | recoup in the case that the business is not able to |
| and only then can they charge the client. | | | | keep up payments. For those reasons, this form |
| However, they have to complete payment for | | | | of financing is generally unsuccessful, however |
| the stock before the order is sent out, which | | | | that does not mean someone should give up. |
| means that they are only limited to selling as | | | | Their next step may be to look for venture |
| much value as they currently have as their cash | | | | capital: however a scrap metal dealership is only |
| balance on their ledger account. This problem acts | | | | likely to gain private equity finance in the form of |
| as a limitation to most businesses that operate in | | | | angel funding from friends and family. The reason |
| this space, because the can only ever grow their | | | | for this is that VCs look to invest in companies |
| business at the rate at which their profit grows. | | | | that have an exciting idea, a unique angle or some |
| And even then, that means no profit can be | | | | form of disruptive technology which is defensible |
| removed from the business; it must be kept and | | | | from competition. You may get private equity if |
| reinvested. For these reasons alone, the scrap | | | | you have some trading history under your belt; |
| metal business can be difficult because you need | | | | however you are generally best to consider a |
| to have a lot of money to get started, and you | | | | bank loan at that point. |
| will have liquidity problems to tend too as well as | | | | One thing that most businesses fail to consider is |
| other issues such as sales, marketing and order | | | | looking for purchase order financing. This will allow |
| fulfillment. | | | | you to scale your business fast, not sacrifice |
| Despite that, there is a solution that most scrap | | | | equity and not have to worry about failing to |
| dealers are failing to leverage to their advantage. | | | | deliver the volume of sales necessary to make |
| Often they will want finance and go to the bank | | | | interest repayments. This works by initially having |
| in search of a loan, however when they do they | | | | your customer place a purchase order, you then |
| will be disappointed. Your average bank manager | | | | go to your bank with this purchase order and ask |
| will not be savvy as to the operation of a scrap | | | | that they pay the supplier or give the supplier a |
| business and will not have anywhere near the | | | | letter of credit. Then you get paid from your |
| knowledge necessary to ascertain the value that | | | | customer and pay the bank. This means that you |
| you can create. A bank manager will generally | | | | only have to worry about closing purchase orders, |
| want evidence of successful trading for 3 years, | | | | and you can continue to grow your business. |