may have all the necessary ingredients that contribute to
successful growth and development, but without the necessary
funds no plan may be implemented
In the course of serving the Rent-To-Own (RTO) industry
Corporation (LFC) fields a number of questions
concerning what conditions constitute appropriate and beneficial
times to borrow funds to expand existing business. One common
scenario is that of an RTO storeowner who has grown the business
in a very conservative manner. An initial personal investment
coupled with a SBA loan created a store with good growth
potential, but by year three profits were flat against the
previous year. The storeowner is puzzled by his store’s lack of
success; the showroom is in a high-traffic area, market trends
are good, and the RTO industry is doing exceptionally well. When
contacted by a storeowner such as this, LFC asks the following
-How are competitors (national/local) in the area doing?
-Was the initial capital investment return funneled back into the
business or is it eroding?
-Are cash flow problems preventing the purchase of exciting new
products to attract customers?
-Is floor traffic down? For what reason(s)?
-Is the ratio of returned and new products on the showroom floor
-Is the store losing customers to national competitors who are
-Is the average agreement income trending down? Why?
-Are the average lengths of agreements trending down? Why?
-Are pick-ups trending up? Why?
After listening to these answers, in many cases, LFC advises
that the best course of action is to expand existing inventory
by financing with a long-term debt structure. Borrowing these
monies has the following beneficial effects: higher profit
margins and longer agreements; longer average agreements; higher
average agreement income; lower monthly obligations; and a
positive cash flow. Additionally, having an injection of funds
to purchase necessary inventory allows the store to use current
cash flow to pay any other accounts that may be in arrears
and/or to augment cash reserves.
A business may have all the necessary ingredients that
contribute to successful growth and development, but without the
necessary funds no plan may be implemented. LFC can help you
determine whether or not a long-term loan is the first step to
revitalizing and growing your RTO business. Please call us at
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