Fun With Funding

Recognizing that buyers of manufactured homes represented a considerable, untapped niche in the Albuquerque, New Mexico, market, Iris Guzman created a proposal to capture those buyers—but it was rejected by her then-employer, a mortgage company. Disappointed, but undaunted, Guzman forged ahead. She prepared a business plan and asked a vendor for guidance.

"He had launched Advantage Printing with the help of an angel who provided financing and expertise in return for 25 percent of the company," Guzman, 29, recalls. "I asked if he would consider a deal like that with me, and he [agreed]."

In that Pay It Forward scenario, Guzman and the vendor set up Advantage Lending Solutions in August 2000. As the company's general manager, Guzman gave the Advantage Group LLC, a provider of administrative and financial services, a 25 percent stake. In return, she received $10,000 upfront and had her bookkeeping, payables, legal work, licensing and strategic planning taken care of. Conserving the $10,000 advance, Guzman initially worked out of her home, paying a pittance to two former co-workers who helped lay the groundwork for what has become a multimillion-dollar operation. "[We] begged and borrowed everything we needed: fax machine, printer and telephones from the father of one of the girls; furniture from Beck's Office Supply in exchange for services; computers from the Advantage Group; and cooperation from our vendors, who agreed to wait 90 days or longer for payment," she says. "I begged everyone from the telephone company to appraisers to our credit reporting agency to wait for their money until we were profitable." She even negotiated for free office space at Advantage Group headquarters. Fortunately, no one had to wait too long—within six months, the new firm was in the black.

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Such wheeling and dealing is applauded by business strategist Stephen E. Roulac, CEO of the Roulac Group Inc. in San Francisco. "Do what you can to front-load revenues and back-load expenses," says the former Stanford Business School faculty member and distinguished professor of global property strategy at the University of Ulster in Belfast, Ireland.

Roulac further suggests offering customers, or prospective customers, attractive tie-in deals. "If a customer will be spending $10,000 a month with you over the next 12 months, for example, propose an advance payment of $95,000 in return for a year's worth of products or services. The customer saves $25,000, and you get seed capital. Work out deals with vendors to extend payment terms and lower your costs. If supplier costs on that $95,000 contract come to $40,000, go to the supplier. Say, 'I'll guarantee you all that business, but I want it for $30,000.' "

The kicker here is equally clever. Armed with $95,000 on your books and that $120,000 contract, you now go to your bank for a loan. It may be smoke and mirrors, but it's perfectly legal—and you'll likely get the loan.

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