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advise on taking a loan to pay for gear Digital Converters
Old 1st January 2011
  #1
Lives for gear
 
Jeff16years's Avatar
 

advise on taking a loan to pay for gear

Sorry if this is a little off topic but I assume some of you guys have done this and/or are researching this.....

So if I were to start a new audio business and I wanted to get a small business loan for $100,000. Any idea what kind of terms you get? As in how long a loan like that would be, interest rate, monthly payment, etc.

i've been trying for 2 hours to get this info thru a google search, it's a nightmare.

I need to step up my gear and my studio.
Thanks guys.
-Jeff
Old 1st January 2011
  #2
Lives for gear
I've done leasing deals hopefully I'm done with them, lol.

Boy, with money the way it is I have to figure it will be tough to get a loan for a studio, but I'm not in the market so what do I know.

When I started my first real studio in 1989 we carried a lot of debt and managed to survive. BUT I was in a high profile location in an NYC bedroom community, and had some connected people. We also has an anchor client that spent 160k in the first year.

I really can't imagine carrying that kind of debt in this climate. All I have to say to you is if you think "If I build it they will come" you might be in for a rude surprise.

Be careful.
Old 1st January 2011
  #3
Gear Maniac
 
Chunky But Funky's Avatar
 

Unless you have collateral worth $100,000 (house or other business), chances are a loan like that would not be underwritten by anyone in 2011. If they would, you couldn't afford the interest rate. They will not use the gear as capital. I can tell you from experience. I took out a gear loan 3 years ago. My wife and I both have very good "day jobs", immaculate credit history and own our home. We went through the bank we have our mortgage with and a 15 year history of never even a late payment. They only way they would finance this "high risk" venture was to put up the equity in our house as collateral. If you have a wealthy relative, the rules change a bit. FWIW, I only had to finance a 1/4 of the amount you are talking about.

Doug
Old 1st January 2011
  #4
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idylldon's Avatar
 

Quote:
Originally Posted by Steffmo View Post
I really can't imagine carrying that kind of debt in this climate. All I have to say to you is if you think "If I build it they will come" you might be in for a rude surprise.

Be careful.
Agreed. A 100K loan will be the proverbial albatross around your neck for many years to come. The main reason small businesses fail? They are under capitalized. I've started a couple of businesses from the ground up, but never did it with loans. Yeah, it was tough in the beginning, but once things got rolling we had the capital to keep upgrading the equipment and make some money as well. In the current economic climate in general and in the recording world in particular, slow and steady might just be the wisest path.

Good luck with whatever you decide!

Cheers,
--
Don
Old 1st January 2011
  #5
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mikethedrummer's Avatar
Honestly, with what you can make with $20k worth of gear these days, don't do it. A good computer, a decent interface, great outboard, couple nice mics, nice monitors, and some treatment is all you need, shouldn't run you more than 20.
The days of councils are over. The main thing separating the "big studios" from the little ones are the big rooms. (and the big ears of the trained engineer but i digress..)
You can do a lot with a completely dead room in the mix. Digital reverbs are only getting better and with their growing use in mainstream music, they are becoming more and more acceptable, i.e; the cannon in a cave sounding snare.
As much as I would love a council, some vintage gear, and some huge rooms, I would much rather have the extra $80k.
Old 1st January 2011
  #6
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Igotsoul4u's Avatar
You would be an idiot to take a loan of that size or any at all to start a recording business. Seriously. Owning your own stuff is not worth it most of the time. You would be better hooking up with someone else that already has a setup but can't meet their business needss. If you combine forces you can help each other. Literally every person I know who did what you want to do either no longer has their studio or is about to lose it. None of them made their money back. Why would u do this in the current state of the music biz? Also, why do you need 100k worth of gear when major label artists record through mboxs.
Old 1st January 2011
  #7
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Ain't Nobody's Avatar
 

I can barely imagine anyone lending money fort that kind of thing now, but...

... there are always sources of money for those who keep looking.

One good example is doctors. They often make quite a bit of money, and don't always know the first thing about investing. This holds even more true for sports figures. Doctors need to be intelligent in at least one area. However, many doctors, lawyes, etc really wanted to be musicans, movie stars, and the like. Many of them still relish the thought of being "in the industry."

There are always people out there who have managed to get themselves into a high paying position in life, but understand little if anything about money management. Many of those people have egos that manage to convince themselves they are skilled investors. After all, the fact that they drive a Ferrari means they must be a genius, right? For this kind of person, the fact that something is a longshot almost makes it MORE appealing.

Those sorts of people can and do loan people money for very speculative things like shooting a movie, opening a studio, etc.

Outside of that, people who DO know how to invest money would't touch it without full collateral unless you were CLA or someone of that ilk... with a long and well documented financial history.


So... my suggestion is:


Skip all of the above. Borrow the money from the mob, and be sure to take enough to cover some serious plastic surgery, and a little bungalow in Mexico somewhere.

Then, kick back with a corona in your new studio and have the last laugh... not too loud though, or you might pop the surgery stitches.
Old 1st January 2011
  #8
Deleted User
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omg, don´t even think about it.

cleanup
Old 1st January 2011
  #9
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dreamsongs's Avatar
 

As has been said...serious mistake even thinking about something like that. I spent, 40k about 5 years ago to completely upgrade my gear and mics and it was more than enough to record almost anything I want.

100k in the stock market or a good growth stock would be wiser. Please expand on this thought cause unless you have a few serious clients to get you started it sounds kind of crazy. heck, even with a few clients I wouldn't do it...loyalty is something that's in short order in many areas not just in music...

Good luck, but even as a fun topic, what are you planning on spending the money in ? Because even with top gear if you don't have a serious console or the experience and connections what good is it ?
Old 1st January 2011
  #10
Lives for gear
 

The above post is about right - in the current climate, you'd have to be a bit of a fool to put your house and posessions on the line for a recording business that hasn't started yet.

But if you feel like being a fool and going for it, fair play to you. Just think about this:

Question 1: Are you getting so much work as an engineer, that your continued use of somebody else's studio is costing you more than it's worth?

If the answer is "No", there is no point buying gear. Why? Because you will not get any more work by having your own studio. Well, maybe a tiny bit. But not drastically. So ONLY if you're getting so much work that using somebody else's place is costing you more than it'd cost to build your own place of the same standard.
Old 1st January 2011
  #11
Lives for gear
 

Quote:
Originally Posted by dreamsongs View Post
Good luck, but even as a fun topic, what are you planning on spending the money in ? Because even with top gear if you don't have a serious console or the experience and connections what good is it ?
Bare in mind that $100,000 to start up a studio business properly only leaves $70,000 max to spend on gear. But when building, you should budget twice what everything adds up to, as building times always overrun, you need more material than you thought, you accidentally drill through something, whatever.

So, if $70,000 was the build/gear amount, I'd be putting $40,000 on build and $30,000 on gear (to account for a $20,000 projected building cost, for properly built walls, windows, doors, floors, acoustic treatment, furniture, etc). So $30,000 will buy you little more than a decent Pro Tools HD setup with a few decent bits of outboard / pre-amps, a good pair of monitors, a fast Mac Pro and a comprehensive enough mic collection.

Doesn't go far does it?!
Old 1st January 2011
  #12
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dreamsongs's Avatar
 

In any case, 100k doesn't even sound like close to enough for a serious studio that would draw away the big fish. And even so, big fish don't go to unknown engineers or mixers to spend that kind of money regardless of the gear.

So, I don't quite understand the point of even talking about this unless you're rich or have trust fund waiting in the wings and this is your hobby. If this is for your home studio you're crazy even thinking about spending that kind of money and if you're starting a new business venture in this economic climate, you're just as crazy.

Bottom line - you're crazy...tutt
Old 1st January 2011
  #13
Gear Maniac
 
casrec's Avatar
 

Small business loans are pretty hard to get these day. That is probably a good thing as much as it is a bad thing. Unless you have collateral like the above poster stated you probably can not get a loan. Also most lenders will only give 10% of net income. So you would have to make $1,000,000 to get a loan for 100k. If the business is not up and running you are probably out of luck. I agree with everyone else that 20 to 40k could get you started in a pretty well stocked and nice room. I would suggest finding a private lender or even silent partner. You will pay much less in interest(most of the time) and with an investor you are not obligated(most of the time) as they are taking a risk.

I will say it will be hard to find an investor, private loan and even a public loan in this industry at this point in time and probably for some time in the future unless you have serious collateral. I would say start out small. When I first started my studio I had 10 grand. Over the next five yeasr I slowly upgraded the studio and combined forces with another engineer to have a pretty decent room and gear list. In the end though when the economy took a dump, it all fell apart.

I am not saying this to discourage you. The recording industry is a great place to be and work in. But If I could go back I would do it different. I would of tried to get a internship or apprenticeship at a larger studio. Tried to build a discography even if it was just as an assistant on some decent selling records. Slowly over time built up my own gear. Practiced, practiced then practiced some more at honing my craft. Start renting out larger studios for my own sessions. Then when everything felt right, maybe start my own studio.

I am really glad I had my own studio for 6 years and I have a lot of great memories. But it was really, really hard. It was a challenge everyday to stay open. I was also in San Diego with a ridiculous amount of competition. I am not saying that you can not do it and a lot of people do. I would just seriously consider everything before you invest 10's or 100's of thousands of dollars.

Sorry for the rant and this is just my 2 cents. I wish you all the luck in the world.

Cheers,
Old 1st January 2011
  #14
Deleted #157546
Guest
A 20k loan should get you started with a small home studio if you want to go that route.

Just focus on getting clients and treating your rooms.
Old 1st January 2011
  #15
Lives for gear
 

Quote:
Originally Posted by casrec View Post
Also most lenders will only give 10% of net income. So you would have to make $1,000,000 to get a loan for 100k. If the business is not up and running you are probably out of luck.
10% of income is also what the bank quoted me last time i asked about a business loan

i would also listen to the advice here already (but in the end make your own decision), look for more creative ways to accomplish your goals, most problems have more than one solution
Old 1st January 2011
  #16
Lives for gear
 
djmukilteo's Avatar
Speaking from current financial experience, there isn't anybody out there in the loan business/capital investment line that would loan you anything like that amount for that sort of business venture even if you had 25% cash down and the collateral!
Even if you had a proven business model with spreadsheets and graphs and proven returns, it ain't happenin.....sorry
All the smart money has left the building....and they ain't coming back!

If you think there's a snowballs chance in hell to build a studio for that amount of money even if you had it cash in your hands and make a go of it in the current economic situation, you have no idea what's going on!
Do yourself a favor and find somebody around with an MBA in business and just ask them your question!....seriously!
Old 1st January 2011
  #17
Deleted User
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au and ag

If you have the money, buy precious metal, sit back and wait and produce music the cheapest possible way.
Old 1st January 2011
  #18
Lives for gear
 
Lee Cardan's Avatar
 

I'm going to go the other way on this, and say that if it's what you truly want to (ie, a recording studio), and if you have really thought about how you're going to pay this back, be it 3 years or 10 or 20, and are really in your heart prepared to make that kind of commitment to satisfy your love of gear and recording for the pure enjoyment, then by all means do what you can to make this happen for you

personally, life's too short to not do what you want to do. I guess some people like golf, nice cheap hobby, unfortunately we've all chosen a pretty expensive hobby. But, you know money isn't real right? It's part of the game we play, and the true winners are the happy ones with a smile on their face and enjoyment in their heart. I couldn't care less what kind of numbers have stacked up against me, I have a smile on my face and I've done the math to know I can sustain it. Had I not pursued a loan myself, I wouldn't be so smiley these days, and how can that be a better option?
Old 1st January 2011
  #19
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Quote:
Originally Posted by Lee Cardan View Post
personally, life's too short to not do what you want to do.

I think there´s a big difference between doing what you want and beeing an utter fool. As in this case, most likely poor Jeff16years will be put in a pityful servant position towards his lender. On that end, for the debter, money is all but an unreal thing.
Old 1st January 2011
  #20
Lives for gear
 
Lee Cardan's Avatar
 

then he needs to think very carefully about how exactly he will get this money (ie who from) and how he intends on paying it back. He needs a plan that realises exactly what the next 5 years of his life will entail, broken down into achievable short term goals (under the worst conditions) and at least one (three is better) contingencies that will give me an out should he need it

I don't mean to say just rush in an grab grab grab what you can and deal with the consequences later, but IF he can really look at this plan objectively and generate the necessary income to pay it back in a not too long timeframe, well, if it's what he wants then he should identify a way to get it
Old 1st January 2011
  #21
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Lee Cardan's Avatar
 

Quote:
Originally Posted by escape View Post
I think there´s a big difference between doing what you want and beeing an utter fool
and I 100% agree with you

When I did this, I was lucky enough to be in a position that did involve an established passive income, which could sustain the studio in itself until the loan is paid off. But I made this the case intentionally. I planned for almost a year and always had my goal in mind. I certainly didn't rush in, and I'm definitely not suggesting anyone does, but hell, what else was I going to do? I worked in an office doing an expected respectable job and pissed away most of my income every night- I was a fool once too
Old 1st January 2011
  #22
Deleted User
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cleanup
Old 1st January 2011
  #23
Lives for gear
 
Scott Whigham's Avatar
 

Quote:
Originally Posted by johnnyc View Post
10% of income is also what the bank quoted me last time i asked about a business loan
Same here - OP should be aware that it is "10% of income listed on your tax returns" rather than "10% of what you say you make" or "10% of what you listed on your tax returns plus what you did not report"
Old 1st January 2011
  #24
Quote:
Originally Posted by Jeff16years View Post
Sorry if this is a little off topic but I assume some of you guys have done this and/or are researching this.....

So if I were to start a new audio business and I wanted to get a small business loan for $100,000. Any idea what kind of terms you get? As in how long a loan like that would be, interest rate, monthly payment, etc.

i've been trying for 2 hours to get this info thru a google search, it's a nightmare.

I need to step up my gear and my studio.
Thanks guys.
-Jeff

You have to be able to seperate the "World of Gearslutz" from the real studio world. By this I mean that one of the problems this site perpetrates is this notion that everyone in the working world has all this fancy gear in their racks and that its a normal thing in order to get good work accomplished. On the contrary, the world of Gearslutz is one small sliver in the day of a working professional. By this I mean on the daily grind in your business, the most prevailing thought isn't "how am I going to figure out how to get the cash to pay for the new whiz bang compressor/eq/mic pre?" Its mostly "I hope I have enough good paying bookings to pay the bills this month". But this is a side of the business side that's not shown a lot here because:

1) it won't sell gear
2) its boring and the truth hurts
3) we all go through this all the time so to talk about it all day will turn into one big moan zone post

But the truth is the truth. In business you have to be able to seperate your needs from your wants. The needs are necessary for the business survival. The wants just make you feeel good in the short run, but trust me it won't last. It then becomes acquiring gear or the chase of it and that is a whole issue in itself that most people struggle here than would admit to themselves.

Whoever said to start small and add on as the need starts to grow is right. Slow and steady wins. Own everything and refuse to carry any debt unless its a real emergency.
Old 1st January 2011
  #25
Lives for gear
 
Lee Cardan's Avatar
 

Quote:
Originally Posted by escape View Post
How can you have 3 outs on a 100k loan with possible no collateral but following your dream?
Let me put more emphasis on plan,
I don't know the exact position Jeff is in, but he needs to identify where he is at, where he will be, and how he can get to where he needs to be for that to happen. For a plan like this to work, you need to really inspect every aspect of your life, rearrange your priorities immensely. You may need to change career for a few years, who knows, but the point is you need to really understand your position and put yourself where you need to be. He may want this now, but he may not be in the position to get it for another 5 years. If he at least know this is what he wants, he can start heading towards it which is the most important step at this stage

I know this is all just words, but of course there's no specific answer to any of this. For me, the magic number was 27, which is the age at which I started to think differently. I finally began to understand the concept of a goal, and planning, but now I think about it I've seen really determined people do this at such a young age. You don't need to be a certain age, have a specific income, or follow any one set of rules to making a progressive leap forward. I think it all comes down to identifying what you actually want in life, and the rest will unfold - I guess we could call it greed in a sense, but a nice kind of greed. It's when you really want something that you'll manipulate your life and everything around you to get what you want. I only recently realised what I wanted to do, some people are lucky enough to know that a little earlier in life, and unfortunately some never get to find out. IF you know (and you'll know when you know), then no matter how long it takes or how far away it seems, never forget it and always push in that direction, otherwise what are you doing here at all?

I can only be specific about myself and say that I've been spending money on gear for a long time now, so at the time I looked at a loan I already had a significant amount of money invested in gear - selling off all what I had at half the going rate could cover my loan (1st contingency). I factored income insurance into it so that If my plan failed, I'd have 6 months backup to cover my overheads and loan repayments before I needed to sell (2nd contingency) - income insurance in fact would cover me for a year, but if I couldn't recover in 6 months I'd say game over (no wait, this round over). 3rd contingency, well, I don't really have one, but I'd like one, and suggest you do.
Old 1st January 2011
  #26
Moderator
 
narcoman's Avatar
 

You won't get a business sloan for that amount without substantial collateral and/or significant industry credibility/success.

You may be able to get lease based finance - but they will only finance something like 70%. You'll have to find $30k yourself and show excellent trading on the books.

Also - you'd need to have turnover in the mid six figures both from their perspective and from yours!
Old 1st January 2011
  #27
TLR
Gear Head
 
TLR's Avatar
 

Quote:
Originally Posted by mikethedrummer View Post
Honestly, with what you can make with $20k worth of gear these days, don't do it. A good computer, a decent interface, great outboard, couple nice mics, nice monitors, and some treatment is all you need, shouldn't run you more than 20.
The days of councils are over. The main thing separating the "big studios" from the little ones are the big rooms. (and the big ears of the trained engineer but i digress..)
You can do a lot with a completely dead room in the mix. Digital reverbs are only getting better and with their growing use in mainstream music, they are becoming more and more acceptable, i.e; the cannon in a cave sounding snare.
As much as I would love a council, some vintage gear, and some huge rooms, I would much rather have the extra $80k.
Brilliantly said. The age of the Project Studio has started, but the position might shift back to the bigger studios when the popular music medium moves from Stereo to Surround.
Old 1st January 2011
  #28
Deleted User
Guest
Lee,

seems it all boils down to 10% of income. So it´s all been said I think.

Happy New Year
Old 1st January 2011
  #29
Lives for gear
 

Quote:
Originally Posted by TLR View Post
Brilliantly said. The age of the Project Studio has started, but the position might shift back to the bigger studios when the popular music medium moves from Stereo to Surround.
HAHAHAHAHAHAHAHA!!!!!!!!!

yeah, cuz stereo recordings are selling so well these days!
Old 2nd January 2011
  #30
Registered User
 

you wont need advice cause the bank will laugh in your face you wanna do what a recording studio hahahahah get out dfegad
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