What's the Deal? You need money fast!
I realize you need money for your record company especially when you’re just starting out. Everyone wants this, but somehow they look at business credit as free money and it’s not.
The need to get started quickly is that spirit of greed that lies inside of you because nothing grows quickly unless all of the right ingredients and pieces are there, to begin with. So, getting started quickly isn’t exactly going to help you when 99% of you do not have all the pieces to go from 0 to 100 real quick.
You need money to get started but how much is it really and can you allocate this money over time while organizing your game plan? The Truth is you're anxious to get started in a business where the only thing you have is a vision. You can never speed to the finish line of your vision when you don’t the basic rules of the game you’re playing. Everybody goes through this so don't stress about it. Nobody knows what they are doing until they go through it.
I can testify!
I understand that it's hurting your pockets to get started but that just gives you more reason to slow down and pace yourself through this progress. I’ve used credit to run my first record label venture into the ground. Really! In fact, I’m still paying the cards off lol.
Let's break things down, shall we?
At the starting stages, credit is used in 2 ways, a 30-day front or continuous revolving payments. Credit is designed to keep your Cashflow positive but either way, you’re going to have to pay it back.
Let’s talk about Net 30
Net 30 credit plan is designed to have the creditors essentially front you money for a specific item for a job to be done so you can complete the job make a profit and pay the creditor their money back. No interest no headache no problem. In fact, this is how all new business owners should use credit.
Remaining Cash flow positive
What just happened is you used the creditor's money instead of yours to complete a task. This allowed you to keep your money in your pocket just in case you needed to use that money for an emergency. You actually just used the credit card or net 30 accounts as leverage!
Let’s say you have room in your business expenses to afford an extra $200 a month in business expenses. If you have a business credit card you can pay for a $2000 Item that will produce a gain for your business over time. In exchange for that product, you agree to pay your creditor back with interest in 10 months for $200 a month.
Remaining Cash flow positive
Yet again you just used the credit card to remain cash flow positive over the course of 10 months instead of 30 days. Now you have the tools you need to make more money but keep the $2000 in your pocket for the initial purchase. This prevents you from being on pins and needles trying to get the money back to stay operable.
Let's say you need to do a basic record deal, based on your masters only, in order to grow this allows you to leverage your master recording copyrights in exchange for $250,000 artist advance up front plus a combined marketing/promo, touring support, and recording budget of $750,000. In exchange, you get a 15% royalty after you pay back 6.6 million. Go watch How to valuate your music for music investors and NFT's if you want to know how I got to that number.
Obviously, this is a bad deal but at least if your project is promoted right it allows you to make more money in your other categories of Live Performances, Merchandise, Brand Endorsements, and Sponsorships.
Remaining Cash flow positive
This record deal for your masters allowed you to remain cash flow positive in the other 3 main categories of a recording artist business.
Eventually, you will hire employees and have a bigger operation that you will leverage with business credit keeping your entire organization's cash flow positive.
What’s the risk
You’re more than likely going to be the personal guarantee for all of the debt if the business goes bust! This means you risk messing up your life financially or you may end up paying back a lot of debt over time which can put you at a disadvantage if you crap out and quit. This causes major headaches and discomfort.
Let’s say you want to give it another shot, you can’t start again with another artist and apply for credit because your allowable debt is taken up with the previous artist. Or if it was all for you and you call it quits you’re going to be responsible for the credit even though it’s posted on the business credit profile.
You should not use business credit to make any of this happen unless you are already making some type of consistent income. The record business is too risky and you should only take a loan based on the amount you can reasonably pay back.
What's my Point?
I believe that both of us can agree that at some point you will need business credit without a shadow of a doubt. However in order to get that business credit you're going to need the front end of the record company set up right. That means an LLC designed for a Record Label.
Secondly, I know paying for the credit borrowed is a concern as well which means we've got to open up the cash flow on the back end therefore collections have to be set up right.
How are you going to do this to secure the business credit? I have a perfect way if you couldn't guess it lol "The 60 Day Record Label Executive Edition".
You've got work to do!
Grab The 60-Day Record Label Executive Editon and build out your label so you can use the business credit to take care of your monthly operations as you begin to grow. IF you want to just take a look at what you’re going to need for this operation grab the free version.
What the end of the tunnel looks like
Your LLC will be set up so you can apply for business credit without hassle. You will be set up to properly run your single-man or multi-member record label and publishing company so you can cut out the middleman and you’ll have a framework to build your next LLC, your merch company!
Regardless if you want business credit or not, your DIY record label must be established properly or you will stall out. It will give you headache after headache and you will eventually have to go back and do the same process that I explain to do in the beginning of the 60-Day record label anyway.
Change your mindset
If you were misusing your business credit or PPP Loans or SBA Loans you might have been confused in the beginning. Now, since you have a basic understanding of credit and also a basic understanding of record label advances, you're already a winner! Go forth and be great Boss and I'll see you next time!
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