Small business finance is a tricky thing. Contrary to popular belief, more startups are funded on debt than on equity and Pure Adapt falls into that category. We value our stock immensely and would prefer to intelligently manage our debt as opposed to giving up equity. Up until this morning, that process had worked out well for us. At any given point we generally have about as much revolving debt as the value of our Detailed Image inventory – which is pretty good considering if we liquidated we’d be in the positive (not including the value of our sites, client list, etc….not bad for a 1 year old company).
George has a meticulous plan that he’s been adhering to that takes advantage of low interest rates on our lines of credit and credit cards by shuffling money back and forth. Yea, it takes some effort, but we pay almost no interest on our debt. Again, this is pretty good.
A few days ago we cleared up our largest line of credit – a $40k line with Bank of America – in anticipation of using that money to move in to our warehouse (almost signed a lease) and cover other expenses during Detailed Image’s slow time. We’re OK with DI being a little slow because we can knock off our move, do some development work on the cart, and launch a new e-commerce site before it gets busy in spring time.
Unfortunately, as soon as we paid off the Bank of America line they closed our account. No email, no letter, no phone call, no nothing. So of course, George went to use some of the cash today and it wasn’t there. This line goes back to when George and Greg formed Detailed Image in 2005 and we have never ever missed a payment in 2+ years. We also have had pretty high balances at times so they’ve made some decent interest off of us. And we were planning on using the line in the coming months. Not only have we proved we can pay down a high balance to nothing, but we were planning on building up another high balance. Essentially we’re the perfect customers for them! And they shut down the account for no reason?
George called several times only to be told “we cannot give you information regarding your account. A specialist will call you back within a day”. Wonderful. Very helpful. A great way to treat a loyal customer. Why wouldn’t you call us BEFORE closing such a big account? Don’t you realize that you can crush a small business by taking away $40k in available credit unannounced?
One way or another we’ll be fine, but this is definitely a pretty big roadblock. Gotta love being a business owner – never a dull moment.