1/24/2009 More info – Larkland.morley@gmail.com
Business Lines of Credit – Immediate Financial Leverage
Do you have a problem to secure funding for your business ideas? There are several
problems where adequate funding could help, they are to generate a basic income, start a
business, buy property, expand a business, keep a business going or explore new business
ideas. The biggest constraint is always to find enough available funding to achieve these
objectives.
Today, we will explore a very simple means to get this funding with minimal work. The
key to build business and personal investments is the concept of leverage which means
you use a small means to make significant gains. Most successful business persons would
say that regardless of what you are doing, you should aim to use other people’s money
(OPM) as much as you can. This is even truer if you don’t have much money in the first
place.
Let’s look at the options you would normally have.
1. Good Credit – Typically, if you have good personal credit, you can only borrow
so much especially for unsecured investments. Examples are buying a franchise,
research company or service company. You maybe able to get away in the area of
real estate but not easily.
2. Business Partners – Assuming you have a great idea but little capital or credit to
work with. The next best option is to find suitable investment partners. This is still
very good option but the downside is that you most likely have to give up
controlling interest in the business so that the partners can protect their
investments. There is a way to do this and still come out on top that we will
discuss later.
Looking at those two options, they are still very important and can move you faster into
your business investment, but lets look at a another lucrative idea that could give you
control and returns quickly.
The idea is the concept of unsecured business lines of credit. This works by forming a
corporation then build a credit profile over time that would allow the business to loan
money on its own without any real assets as such except a good credit record. This
approach will take about six months and still good to pursue regardless.
Now, let’s say you want to move on your idea as soon as possible, there is one other
option based on the above approach. The idea is to acquire a Shelf Corporation with an
established credit profile. This means you would save the time required to build the credit
profile and have cash in hand within about two months are less.
Larkland Morley Larkland.morley@gmail.com

1/24/2009 More info – Larkland.morley@gmail.com
How does it work?
Most providers of Shelf Corporations with Credit lines would charge an upfront fee. In
the case I know it’s about $10K and they get you the corporation with about a $100K
credit line attached within two months. They then charge a back-end fee of 10% which
leaves you with approximately $90K. Depending on how you look at it, you are turning
$10K into $90K of cash. You can then use that $90K to acquire more Shelf Corporations
and associated credit lines as you see fit.
Definitely one use is to look at real estate first as a stepping stone then your other
ventures could be funded consequently.
Now, let’s go back to getting started. The source that I have worked with it has two
options. The first one we discussed above with $10K upfront cost. The second option is
to put in $20K upfront and get about $450K in the same time frame.
I always like to think for the person with very little cash in hand and maybe not much
credit options. Here are a summary of what has worked for others in the past:
1. Use own existing cash of $10K or $20K to get started – This is the best case
2. Apply for a personal Credit line at your bank for $10K. If loaning money the
smaller amount is advisable
3. Work with other providers who may get you a credit card with no personal
guarantee for up to $50K at less than $3000.00.
4. Borrow money from associates and pay them a fee from the LOC proceeds. This
means you need to offer a good incentive for them to lend this to you.
5. Find a means to earn cash based on your skill-set. This could mean online
marketing, e-bay, second job, seminars or whatever you can use quickly.
Assuming you can move forward with one of these approaches, I will give two realistic
examples with details on how this could make you very successful in a short period of
time. The two areas are Real Estate and Franchising.
Real Estate Funding
There are many ways to invest in real estate but for this example, I will focus on
Commercial lease properties. Many of the big name brands will not necessarily own store
buildings in local markets (this includes banks, pharmacies and others). They would enter
into long term leases with building owners to accommodate their businesses. These types
of leases are referred to as NNN/absolute leases. This means the tenant takes care of all
maintenance and other expenses relative to the building. The building owner basically
gets a check each month.
Most of these leases are generally long term, meaning ten (10) years or more. The other
factor is the issue of credit ratings for the tenant. The lease term would cover payments
Larkland Morley Larkland.morley@gmail.com

1/24/2009 More info – Larkland.morley@gmail.com
for the lease period in case the tenant company decides to move out. This is where there
would be a corporate guarantee on the lease.
Let us run some example numbers. Assuming a property for sale at $4M with a CAP rate
of 11%, this means the property is paying $440K per Annum gross. That’s good but now,
you need to purchase and hope to keep a significant portion of that money as profit.
If you were to get a balloon loan to cover 100% financing at 7% interest per year.
Balloon loan means that you pay interest only and then the full principal at the end of the
term. Typically at the end you could re-finance or sell the property which could be worth
more then as well.
With a loan at 7% interest, your profit would be (11-7%) which is 4% and $160K profit
per year.
Where the Business LOC does come in here? One way to get the 100% financing would
be to put up at least 10% of the loan amount on some bank instrument for the loan to be
process. Once the loan is processed and funded, you would get your LOC (10% for the
Bank Instrument) amount back which means you remove that debt and can look at other
properties to repeat the process.
This means, getting the Business LOC for $450K within two months would have you on
the way to making $160K per year. Of course it could be less and could also be more but
the bottom line is that you would make way more than $20K per year with all of this
combined.
Franchises Financing
A Franchise is basically an established business providing a license to another business to
use its business model and brand for marketing/sales in a specific location. Franchise
formats can vary depending on the nature but in general you could term it as a business in
a box.
Typically, when you acquire a franchise, you need to pay upfront fees, monthly
maintenance fees and follow the specific formats as outlined in the agreement. The basic
idea is that you would have all the leg work done to start a business and you just focus on
building the business in your location.
Opportunity
The current economic climate has created unemployment for many skill professionals
who would love to exercise their business instincts especially with the possibility of
things picking up in the future. Franchising is a great way for someone with no business
experience to explore the business world with less risk as the relevant training and
guidance are normally provided with the package. The opportunity is there to fund the
Larkland Morley Larkland.morley@gmail.com

1/24/2009 More info – Larkland.morley@gmail.com
startup of a franchise using the Business Line of Credit (BLOC) facilities. The basic steps
with the BLOC are as follows:
Identify a Franchise Opportunity (Including Revenue Model and Forecast)
Secure Shelf Corporation with associated BLOC facility
Pay all upfront Franchise requirements including training and setup
Working Capital to support Marketing and Initial Salaries (Up to 1 Year possibly)
What this means, is that if you were laid or about to be laid off, the prospect of finding a
proper job maybe difficult, so there you need to look at options to generate an income
quickly.
Challenges
As mentioned earlier, with your personal credit, it’s difficult to get enough capital that
allows you to take your new investment to the next level. You want to have the best setup
for maximum success. Most small businesses fail because they lack funding, so you want
to ensure you have a clear funding option in place.
Example Plan
Finding a quick example of how this would help the client. Since financial services are
likely to be in high demand these days, we will use an example generic business services
franchise opportunity which offers Financial, payroll, consulting & Tax services.
The investment information is outlined below
Total investment: $88.9K
Franchise fee: $27.5K
Net worth requirement: $100K
Cash liquidity requirement: $50K
Assumptions from the above data seem to imply about $150K requirement to get started
on this project. You could also assume that if you hire one mid-level professional for
about $60K/year that would be about $210K capital requirement at least with some in
reserves.
Using the earlier calculations, we can approach the problem two ways.
Invest $10K of cash to acquire the first Shelf Corporation with $90K Line of Credit
attached. Out of that $90K, you use $10K to apply for the expansion line of credit for
approximately an additional $350K plus purchase the franchise right for $27.5K and any
required training needs. While you wait for the additional funding you can plan your
project, get training and all the required leg work. At this point you would have about
$52,500.00 in funds to work with. Once the additional funds become available, you have
Larkland Morley Larkland.morley@gmail.com

1/24/2009 More info – Larkland.morley@gmail.com
almost $400K in working capital that allows you hire staff and open the doors to your
business.
The second option is to invest $20K upfront and have the Shelf Corporation with $450K
(minus additional back one time end fees on the additional credit) credit attached. This
allows you to do all of the above faster and open your business door as soon as you can.
Franchise Market Research
The above numbers look good and very much achievable in a short period of time. Going
forward it’s very important in the case of franchise to research the market in question to
ensure there is sufficient demand for the business. Prepare and brainstorm the revenue
model that you want to pursue for long term success.
Summary
As we have seen in this basic paper? There are options to make use your skills and
money to increase wealth without too much pressure.
The examples of Franchises and Real Estate are just some of the ideas we have on how to
invest for reasonable short to mid term benefits. The basic steps are as follows
Identify an idea that you want to pursue
Determine the demand or Revenue potential of this idea
Develop a plan on how much is needed to finance the idea and how long
Secure Funds to purchase Shelf Corporation (Credit or Cash Options)
Purchase Shelf Corporation with Line of Credit Attached ($10K or $20K Option)
Get Funding and Execute Business Plan
Please send an e-mail (larkland.morley@gmail.com) and I can refer you to the sources
that can outline the best path forward based on your specific situation.
Larkland Morley Larkland.morley@gmail.com