Robin Sauve was growing increasingly anxious. She and her husband, John, had started Barkley Logistics, based in Enfield, Connecticut, last June, shortly after buying the assets of her former employer, Premier Logistics, which had shut down after running out of financial options. Now, four months into the life of the new business, orders were slowly picking up for Barkley, which arranges merchandise shipments and deliveries of time-sensitive materials such as coupons and promotional fliers. Though not nearly as much business as Sauve had hoped for, the flurry of new jobs was nonetheless straining her ability to finance operations, and Sauve's financial adviser had told her she would soon need to get a line of credit to finance the company's growth.

But the idea of going deeper into debt put both Robin and John, who heads sales and marketing, into a panic. They had already taken on $40,000 in credit card debt, a tolerable level, they figured. Though Robin believed in the business, she reasoned that if things didn't work out, she could still sell the company's assets, find a new job, and pay off her credit cards. Taking on even more debt with a line of credit—her financial adviser had said she would need at least $75,000—was a leap she felt she just couldn't make, as she would possibly be putting everything at risk, including her house. "In my head, this was huge," Robin says. "I thought, If you do this, there is no turning back."

The Sauves are a pair of unlikely entrepreneurs. Starting Barkley "was unexpected, almost surreal," Robin says. They are the type of people who always seem to hold down a steady job and manage to carefully save. But the bank seized Premier's assets in late May, and within days, the Sauves made their move. As Premier's vice president of business administration, Robin knew how effective the company's software was. And she figured a new company with fewer employees, a solid client list, and less overhead could be a moneymaker. Sauve offered the bank a little more than $6,000 for Premier's assets, which consisted mainly of the software. She pulled together the money from savings and credit card advances. The Sauves hired three former Premier employees, who agreed to defer their salaries until the company was on surer footing. The Sauves' Great Dane, Duval Street, was also often in the office, especially when the team worked late into the night.

Buying the business was the easy part. The fallout from Premier's implosion was another matter. Premier contracted with trucking companies to move material for its customers. But when the logistics firm ran into cash-flow problems and couldn't pay those carriers, the carriers turned around and tried to collect from Premier's customers. (Girard Robitaille, Premier's former president, declined to comment except to say, "We were in business for almost 10 years and served our customers well.") And even though Barkley was not affiliated with the former owners of Premier, Sauve knew former Premier clients would be wary of doing business with her. At the same time, she needed to contract with some of the very trucking firms Premier had shortchanged. And she feared they might think her firm was just an extension of Premier and refuse to deliver shipments until she covered their losses from Premier. "That would have collapsed us before we got off the ground," she says. "It was nerve-racking."

As she got her start-up off the ground, Sauve realized she needed some help. Though she knew the operations side of the business, Sauve wasn't as strong in finance. An accountant friend introduced her to Robert Perry, a retired partner at her friend's firm. Perry agreed to oversee her books and counsel her on strategy. His very first bit of advice: Sauve would need access to outside capital. But he said a bank would want to see several months of revenue before it would even consider funding the company.

Sauve was having some early success at lining up customers. Dan Boyden, sales manager with former Premier client Mailing Services of Virginia, says that although his company had to scramble to find backup shipping options when Premier shut down, he didn't hold Sauve responsible. "We trust Robin and her team," says Boyden. "So it was natural to give them a shot." By the end of July, Barkley was doing about $20,000 a month in revenue.

Still, Sauve wasn't ready to go hunting for bank capital. For one thing, not all former Premier clients were as trusting as Boyden. Sauve had hoped to win over about 20 percent of Premier's former clients, but by late summer, less than 10 percent had signed on. "Some people still had a bad taste in their mouth about the old company," says John Sauve. "Certain clients want to take baby steps—do a small deal with us and see how it goes before committing." Says Robin: "I thought, If we go for the line of credit too early, we might regret it."

Her doubts were echoed by warnings from family members. John's and Robin's fathers were Navy veterans who left the service and became engineers. Both had earned a steady paycheck all their lives and had impressed on their children the importance of financial discipline. Robin remembers John's dad asking a litany of questions, then concluding with a statement: "Just make sure you have your heads screwed on straight."

After months of troubled nights filled with anxious dreams, Robin started gaining more confidence. Barkley completed 30 jobs in October, double the business in September. For the first time, revenue covered operating expenses (though the Sauves still weren't, and aren't, paying themselves or their employees). Sauve was also encouraged that some former clients who had been gun-shy about giving her business seemed to be coming around. One former customer wrote Sauve an e-mail explaining that the fallout from Premier's failure made Barkley "a bit toxic around here," but he didn't see it as "a long lasting problem" and admired her "chutzpah" in starting the new business.

The Decision In late November, Sauve met with Perry in her office to go over Barkley's finances. Perry pointed out that with business picking up, she was going to have difficulty paying the trucking firms on time if she didn't have some outside financing. He argued she couldn't continue to rely on credit cards—she needed to go for a line of credit backed by a personal guarantee. "Those are the rules of the game," Perry said. "If you want to play, that's what you have to do."

Given the pace of new contracts, Barkley was on track to hit $100,000 a month in sales by the end of April—a trajectory that gave Sauve confidence that putting her personal assets on the line wasn't as foolhardy as she originally feared. After a conversation with her husband, she decided to move ahead with an application for the line of credit. "I knew this was the make-or-break moment," she says. "We need to either go for it or stop operating the business."

In December, Sauve and Perry applied for a line at the bank from which Sauve had purchased Premier's assets. In mid-January, she received a notice that the bank intended to grant the line. If the line comes through as expected, she plans to pay off about one-quarter of her personal credit card debt, a move that will save her thousands in interest charges. And, assuming the company continues to grow, the Sauves will have enough money to move out of Premier's old office space, which still holds boxes and files from the old company. "We would love to start fresh and have a change of environment," Robin says. And she is growing more comfortable as an entrepreneur. "We had the rug yanked out from under us when Premier closed and had to make some quick decisions," she says. "But every day, we get more accustomed to this new life."

The Experts Weigh In

Get Creative With Cash Flow

This situation is not unusual, because many entrepreneurs bootstrap in the beginning, using whatever funds are available—savings, funds from friends and family, and credit cards. Sauve's next option is to do some creative cash-flow management. She should hold off buying anything she can and lease instead of buy. Sauve should also negotiate arrangements with suppliers where possible, in which she would pay slightly more if she can pay later. And she should cut deals with customers in which she gives a discount if they pay quickly.

Dennis J. Ceru
Adjunct professor | Babson College
Babson Park, Massachusetts

Find a Banker

Sauve has some things going for her. Most important, she knows the business and knows her customers. But she needs a relationship with a banker. And she should have formed that relationship back in June, when she started the company. That banker could have helped her with her cash-flow management and put her on a course to be credit ready. She also could have set out her projections for the rest of 2010 with that person, and as she hit them, it would have given the banker a lot of confidence about moving ahead with a line of credit.

Maria Coyne
Executive vice president
KeyBank, Cleveland

Make a Deal for Capital

Sauve should consider a collateral or royalty arrangement. Under these kinds of deals, she would find a high-net-worth individual who could either provide collateral to the bank and help secure her line of credit for a fee or, in effect, act as the bank and provide the line directly. Under the latter approach, this individual would get a percentage of the company's revenue, maybe 5 percent or 10 percent, up to a predetermined cap. That payment would be in lieu of interest on the debt. This is not all that common, but more people are starting to look at it because returns on cash holdings are so low right now.

John May
Managing partner
New Vantage Group, Vienna, Virginia