New Shop and financing

[mblaszkiewicz]

My partners and I are trying to get a production shop started. We are planning on producing billet ar's to start. We have a business plan, licenses, a rented location and all the legal requirements, verbal orders (i can get purchase agreements and P.O.'s for the pieces). At this point we have only been able to raise about 35K for a 100k budget to get started. I have called a few invoice factoring companies and a few online lenders, but with no time in business we can't find anyone to finance to PO's to get the equipment and material. Any ideas or places that work within these parameters would be helpful. Also my partner has excellent credit. (+800)

 

[Ox]

Risky Business....

By the time you are fluent, the surge will be over.

You may have written orders, but try getting them to take parts when the turn comes.
Let alone trying to git them to pay for parts that they can't sell.

"Factoring" for AR parts?
I don't think so...


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Think Snow Eh!
Ox

 

[wrustle]

First of all, good luck in your endeavor! Second though, 100K is not going to go far at all with regard to equipment, unless you're starting out with old used machines.

I'd be far more concerned with the insight Ox has just posted above. "Verbal orders" have never paid anyone's bills. Hard copies are not even a guarantee of orders to be filled per agreements between vendor and customer.
You're going to be sticking your neck out a mile with no safety net. You may want to seriously consider having more funds available before starting out in the manner in which you describe.
Funding and cashflow will be your biggest hurdle for sure!

Later,
Russ

 

[mhajicek]

I wouldn't invest in that. It's a highly competitive, saturated market. What are you planning to do that your established competition isn't?

 

[Mr.M]

Machine dealers can finance machines. Some are better with higher risk/startup biz loans than others.

As far as getting into AR manufacturing, I agree with Ox and Matt. I personally would not get into firearms mfg at all unless I had legit ideas to improve on the designs and either I or someone willing to partner was a skilled competitive shooter that could help with R&D and promoting the products.

 

[Comatose]

We're heading into a major contraction. Everyone who wants another AR already has five. They don't put food on a table. It's the very definition of discretionary hobby spending. My best advice would be to wait a year or two, save your money, and in the meantime sign up for every auction house's notifications. You'll be able to pick up a complete shop that's already tooled to make them for pennies on the dollar soon.

 

[barbter]

The best bit of advice I had when starting out, was don't finance today, what you can't clear tomorrow.
In other words, say you have bought a shiny 100k machine, and over the weekend the shit hits the fan and for whatever reason, you have to sell the machine.
You'll be lucky to get 60k for it, so if you only have 50k initial finance on it, you can at least clear the noose without too big a loss...
Others will argue that this holds you back etc - but if you can only get initial finance with your house as collateral, doing it this way at least helps you sleep at night.
Still, in your house....

Next - "My partners and I".....
You must be new here.....

 

[boosted]

Like Mr.M said, machine tool companies and dealers will finance you unless you are a complete mess. Keep the cash on hand for operating expenses, which will be massive. Plan on working without a salary for the first year or two. It's not necessarily the best way to start up a business, but plenty have done it that way.

I'm in agreement that your business plan seems risky AF. Plenty of established machine shops that would happily do that work, so unless you're doing something different, I don't see a need to build out a machine shop just for those products.

 

[standardparts]

My partners and I are trying to get a production shop started. We are planning on producing billet ar's to start. We have a business plan, licenses, a rented location and all the legal requirements, verbal orders (i can get purchase agreements and P.O.'s for the pieces). At this point we have only been able to raise about 35K for a 100k budget to get started. I have called a few invoice factoring companies and a few online lenders, but with no time in business we can't find anyone to finance to PO's to get the equipment and material. Any ideas or places that work within these parameters would be helpful. Also my partner has excellent credit. (+800)

I'd suggest, if you have not already done it, search 'billet ar15 receiver'. Find some that align with your retail price point and request a quote.

Right now as others have pointed out the AR market is likely to tip toward the negative. Forged finished receivers (not billet) are all over the place for $40. each. Even if someone handed you the $100K what's the lead time on machine, tooling, material, and crazy as it sounds anodizing?

A few years ago had a friend take a $100K bath on receives and he already had the shop space and machines. Bad timing to get into them now. Just my opinion.

 

[mblaszkiewicz]

I am looking into used machines to start. 50k for the machines. We are also a little different. Slick side uppers and a few small changes in the lower. Also planning a piston ar when things get running good.

 

[barbter]

I am looking into used machines to start. 50k for the machines. We are also a little different. Slick side uppers and a few small changes in the lower. Also planning a piston ar when things get running good.

As a newco, the best thing you can have is a pair of machines.
Same pull studs, toolholders, control for the operators, exactly the same program for each machine AND because they're second hand, you at least have one running while the other initially stops on a breakdown....

 

[david n]

I'm not the first to say it in this thread and won't be the last. ...............You'll go bust makin' lowers.....................I know of more than enough shops that went belly up or lost their shorts. I'm plenty deep in the gun industry. Out of all the markets I supply components for, the arms industry is very pleasant to be in. Good paying customers, good margins, good networking. But there's one exception............AR's. Cut throat. Slim margins, feast or famine(seems like a feast, but those slim margins ya know....), slow to no paying customers. No customer loyalty. They'll leave ya for the shop down the road to save a few pennies. Many insurance co's won't cover ya. You're up against established shops runnin HMC's lights out 24/7...........the list goes on and on................Lotsa knowledgeable folks here on PM. You're gettin mighty cheap advise that came the hard way for lots of people..............

 

[boosted]

I am looking into used machines to start. 50k for the machines.

Banks don't like to finance scrap iron. If you really only need 50k in machine tools to get started - why not farm it out until your supplier can't keep up?

You can always start the process of applying for SBA startup loans. Lots of businesses start out that way. They will shut the door pretty fast if you aren't legitimate though.

This feels like a pipe dream. It's easy to get carried away when it's all theoretical.

 

[Toolmaker51]

Warning, thread hack;
Nobody feels this more than I (figuratively). Goal of a Toolroom & teaching facility entirely on my own, since 2006. Finally have very sufficient machine tools, some fabrication, and decent inspection areas, just in the past couple months. Gave up on banks, google's supposed angel investors, a few other agencies, zip. And a partner, well, she passed away.
While I've learned lots about logistics, building ownership, local material sources, the stuff you'd outsource, it is not really a one man job. The PM membership, have been the steadiest help of all.
In the building, looks promising.
At the dinner table, daunting.
After a day unpacking and sorting, hopeless.
Now, regarding AR's. The opinions above are ALL valid, the market is a glut, the guv'mint is downhill AT LEAST till November. I'd venture a guess the next breakout AR will be more like a Mini-14, shedding black rifle image cast by MSM.

 

[vincent eggleton]

I used to work in a firearms store and besides what was mentioned above about prices for new ones (even composite lowers are compatition) I would just like to point out that there are a lot of gun snobs that would not buy a gun if there was any scratches or blemishes in it unless there was a huge discount. Fit and finish is a huge factor just look at the stigma HI-Point has about being the BRICK.

I think AR lowers would sell even if itthe market is flooded for now. There seems to always be a buy out going on or on the way for some reason. You may want to look at making the larger 308 cal. lowers or some sort of gun grip. The .308 cal has far less companies making them and they are not much bigger so the cost to make them may pencil out better.

If you do end up wanting to farming out work or have any questions I maybe able to answer please feel free to message me. I may not monitor this post as well as I wish I could.

 

[Garwood]

3 or more people are going to share the profits of a business in a very low margin product started with $35K?

 

[Ox]

Well, in all fairness, me, my wife, and two kids were all supported by a business started with $10K (all borrowed).
(1989 dollars)

So ...


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Think Snow Eh!
Ox

 

[Garwood]

Well, in all fairness, me, my wife, and two kids were all supported by a business started with $10K (all borrowed).
(1989 dollars)

So ...


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Think Snow Eh!
Ox

I figured each partner was taking their cut somehow?

Anything is possible. I had about $600 and a $10k truck when I started. I sold the truck to buy my first real CNC and my get along went along.

 

[john.k]

Call me an egg spammer ...but....dont put all eggs in one basket.......and ...factoring is the next to last stage to going bust.

 

[jatt]

Hmm yeah.

Diversification is the best tip I can offer here. Those things one thinks is going to be a winner frequently arent. Even worse if what you are doing becomes a race to the bottom.

Even today X years down the track, still have had to change tack as time goes on. If too many get in on something that we do here, dont hesitate to get out of that particular job if cant make a decent go of it anymore.