Financing the Coin Business

Yes but plumbers or any other tradesman have to make an investment to operate, no? Well, I suppose it's like any other dealer then. I'm in the car business, generally dealerships have their inventory on a line of credit, but then again, coin dealers seem to have profit margins we can only dream of. (Or any other retail seller it seems!) OTOH, I wonder if Coin dealers turn their stock as fast as we do, used cars generally have a 60 day lifespan in inventory and new cars rarely last more than 3-4 months on the lot.

 

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no it is not. Plumbers bill $200 an hour and can get bank loans.

Ruben

 

Even at $200 per hour they have to make an investment to start...any trade does. When I get my practice going in a few years I'll have to invest several $100K to get things rolling...that's just the name of the game.

 

Dentists can also get bank loans, although must dentist join practices.

 

Coin dealers can get Bank Loans....my dealer does it often.

Speedy

 

So the bank will give your dealer a 400K loan? Our Pharmacy has a 400K line of credit for drug stock and purchases.

Ruben

 

They pay near to nothing for the coins and sell at what the market will bear. I worked for a coin dealer for 4 years her would pay silver melt costs for silver coins. Then it was 8x face value. Coins that werenot of a good state of preservation he sold for 10x face, or graded and sold for big dollars. All dealers on multiplies they have will sell for less than what is qouted, and if you deal with them regular the price drops more.

 

First off---a coin dealer and a pharmacy are not alike. My dealer doesn't hold that much $$$ in coins. He would have a few hundered thousand but not 400K....and yes, I would say that they would loan him whatever he needed.

Speedy

 

That is very interesting. How long was that relationship? BTW 400k is 4 hundred thousand, so maybe you meant a few thousand? So he could finance a major business deal.

Ruben

 

The only reason I said 400k is because that is the number you said.
No...my dealer would have a few hundred thousand dollars worth of stock.

I guess I'm missing a point---what relationship??
Sure he could do a major deal...

Speedy

 

so he has a 400K inventory, which is a lot, but not that credit line. How long has he had a relationship with his bank?

Ruben

 

I said that he has a few hundred thousand in inventory, but not 400k.....
As for his line of credit, or how long has he been going to his bank.....I'm not a mind reader, nor do I live in the same house with the dealer so I don't know why you would think I would know....

Speedy

 

Ruben, great thread. It's an interesting subject because you are correct that many of these guys don't look like they should be able to afford their own inventory. And buying slow-moving inventory on credit is a ticket to the poorhouse unless it is interest-free.

 

yeah - I don't know how they do it. We should try to do it as an experiment.

great thing to do in a recession.

Ruben

 

The coin business is like a lot of other businesses. Let's look at a small used car lot:

How can a single guy afford to buy 50 cars to sell on his car lot? Credit. He owes the bank (or some other lender) for most of the cars on his lot. The lender may require him to pay 10% or 20% of the purchase price of each car and loan him the remaining 80% or 90%. That means that every day a car does not sell is another day of interest he has to pay (and less profit he can make). The sooner he sells a car the sooner he pays off the loan and the sooner he gets his profit so he can buy another car or two to sell on his lot.

He may also have a few cars that he is selling on consignment. He has not invested or borrowed any money to buy these cars but they take up space on his lot. Depending on his agreement with the owners of the cars he may charge a percentage of the sales price or he may keep everything above a certain price as his fee. Selling on consignment is a good way to expand his inventory at no additional cost.

Like most businesses this guy probably had to srart small. Maybe he started out with only 5 cars to sell. By buying nice cars and pricing them compeditively he was able to sell them quickly. That allowed him to buy additional cars to slowly increase his inventory.

 

The problem is you need to take money out of this system to eat?? Nu?? And will a bank actually extend credit to a coin dealer, especially in the face of the unpredictability of coin values.

Ruben

 

I have many coins on consignment, I just posted a photo this weekend of a new batch of material. Yes, we pre-arrange my cost and I will work on a percentage for listing a coin on my website. I have room at shows on the coins on consignment because I will try to get the best price of course, but always have a risk free " bottom ". Many times I have sold at no profit just to help out a friend.

On the revolving credit, never finance a coin that you cannot buy right, or flip quick.......as stated above, paying interest on storing inventory will break you. The trick to the financing part is sell quick, have buyers lined up or get a good deal.

Another way is to service want lists.
You have a list of coins " pre sold ", you job is to find them. You can work closer that way and the risk is minimal. You must have a good eye tho, or you'll get stuck, or worse case, your " clients" will lose confidence in your ability to track down their wants.

Another part of selling at a profit is to know when the right time to lose is. It is better to move the old guard out at a loss at times, just to generate new cashflow and get the money working again. Money in the case for long periods of time is money you cannot " work ". Get that bad money moving again, it can turn to good money if you do it right.

To sell right, you have to buy right.

The best part of a coin show that I enjoy, is after set-up, to hit the floor and cherry the others to get the coins that I want in my case. Hit the oddballs, the " a bit of everything " dealers will many times not know or care if they have a primo thats your specialty. You job as a profitable dealer is to recognise those coins and grab them up.

Look for " liners". Easy and choice for the grade slabbers that you can buy at generic levels.

This can go on and on. I will post MY thoughts on buying right on a new thread soon. It can be done. The snowball theory, one revolution at a time. Huge profits are not neccesary if the RPM is fast enough !!!

 

^-- velocity of money

 

Thats a good thing Ruben...just think, the Newspaper Headlines from NY read "Brooklyn Pharmacist Jailed on a Million Dollar stash of Percocet's"

That would be funny!!


RickieB

 

Spellcheck?

I love when the newspapers make mistakes. LOL!:goof: