Erica Sandberg is a prominent personal finance authority and author of “Expecting Money: The Essential Financial Plan for New and Growing Families.” She writes “Small Business Credit Profiles,” a weekly column featuring small business owners’ journey with credit and credit cards for CreditCards.com.
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There is simply no stopping Juan Carlos (JC) Perdomo. Not from coming to the United States from Honduras as a child, getting his citizenship or opening his first barbershop with his brother in Miami when he was just 22 years old. With an unerring faith, the resilience to rebound after failures and a unique business concept, Perdomo achieved the American dream.
“I was willing to do anything to make it work,” says Perdomo. “We come from a humble background, but I believed in my brother, who is the most talented barber. Me, I was and am good with business.”
After years of trial and error, his efforts paid off. The Spot is a swank (but never pretentious) barbershop with eight locations and 10 more in the pipeline. It’s a place for men to not just get hip haircuts, enjoy sophisticated services and pick up an array of products, but to socialize.
However, the inception of his entrepreneurial journey was in no way conventional. Perdomo took major risks, including borrowing money from frightening sources. Graduating to traditional financing methods – including credit cards – was a relief.
How did you meet your startup costs?
My brother had been working in a barbershop for two years before it was closed due to bad management. He established a strong clientele, so he started cutting hair at our home. I told him he had to find another place to work, but then said, \u2018Forget it, let’s open our own barbershop!’
We found a space, but didn’t have the money for the first and last months’ rent, which was $1,800. I had $600 in my bank account and $40 in my pocket and that was not going to cover it. I couldn’t ask my mom because we barely had enough for food and rent. I didn’t have credit, couldn’t get loans. The only place we could get the money was from people we knew.
We went back to the old barbershop. The owner was in jail, but we asked him for a loan. It was super scary, but it was just enough to start. After that I worked with a loan shark here in Miami. He was charging 10 percent interest, monthly. It was eating me up so I paid it off as fast as I could. When I did, he let me borrow $25,000 more and agreed to lower the interest, but it was still really high.
What mistakes did you make and learn from?
We made a lot of mistakes! The first shop opened in 2001, and then we opened a second that flopped. We learned what we did wrong, which was following the old barbering model of chair rental and not taking into consideration the demographics for the locations. Little by little we built up our company.
For a long time we still had to borrow money because we wanted to expand. It was incredibly stressful to be in debt. I used to hide from phone calls and lenders. It’s one of the worst things to live with, but hiding isn’t right. Thinking back now and remembering how many people I owed money to – my cousins, sister, aunts – it still makes me a little sick.
When did you transition to traditional financing?
We got to a point where we needed to shop for real loans and credit cards. We had to have more money to expand. I was never fortunate enough to get a small business loan, except for one with Square, for $100,000.
As for credit cards, I started with a Home Depot card. We used it to build out the spaces. Then we got two other cards, a Capital One Platinum Credit Card and the Premier Rewards Gold Card from American Express. We used the cards for things such as fixing the air conditioning to buying televisions for the shop, just everything possible. I would max them out and pay the balances off gradually. I accepted the fact that there would be interest added, but trust me, it was a huge improvement over what the loan shark gave us!
I used the credit cards this way for the first 10 years we were in business. It was great because I didn’t need to ask my family or anyone else for money. I could just charge the things we needed then pay over time. Today, we are fully profitable, so we do use the cards but never carry over any debt. That feels amazing.
What business and borrowing lessons can you share?
My best advice is first make sure it’s a business you want to be in. You have to be passionate about it. If you don’t have the money, that’s OK, don’t let that stop you. It is your job to make it successful. Use your courage. Convince someone who believes in you to help with a loan.
Don’t be afraid to fail. Things will go bad, and they should because that’s the way you learn; you fight to make it work. Make sure you have people around you who share your dream, too. Without my team – Fredis Perdomo, Diana Hernandez, Yaddiel Marin, Sal and Robeto Sacasas – we wouldn’t be here.
Get credit cards and take advantage of what they can do for you. Charge wisely. If they’re for your business, don’t use them for clothes or dinner. Have an understanding of them. You’ll probably need to borrow from different institutions eventually, so get used to using credit cards to build your scores. Mine are all in the 700s now.
When you show all those creditors that your business is working, they will be willing to help you out even more. For us, investors and banks are lining up to give us credit! But if you don’t have the guts to be all in, money isn’t the problem – it’s you.