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View Full Version : Where is money for small business??



steve4240
08-14-2011, 08:20 PM
Hi everyone. I have a question for those of you that have been able to get any type of government/state small business start up capital. I have been looking all over the internet for info, but it seems like the links just keep sending me in circles with no real concrete answers. I will start by explaining the business I want to start. Im looking to purchase equipment for silk screen printing and embroidery business. I have written alll of my stratigy and details in my 34 page bsuiness plan. I have done my research on what equipment is needed for all this. I need $15k to get this started. 12.5K of that is for long term assets (silk screen print press and embroidery machine), 2k is for inventory (blank shirts, blank fitted hats) and the rest is so I can pay for professional training on the print press and the embroidery machine. Phase one of my business plan will take place in my basement. During phase one, I plan on building a tight nit following in my area and throughout the midwest. I plan on Gorilla marketing by using facebook,google+,websites that I am curretly building,all the different fourms I am on and the most important in my opinion Youtube. As a dj I have built a small global following by being stratigic with Youtube by doing interesting videos and tutorials. I know I can pull this off with my clothing idea as well. I would appreciate any advise on getting some type of small business loan. I have even signed up for free small business classes provided by the state of Michigan. I need more info, please help.

Spider
08-14-2011, 09:01 PM
I think you have a different definition of "small business" from what the government considers small business.

Examples of SBA-defined Small Businesses
General employee and income standards for a small business maximize at no more than 500 employees and $7 million in gross sales. While this standard is clearly defined for most industries, there are exceptions. For example, technology companies involved in programming and system design can have up to $25 million in sales. Building and industrial construction contractors can make up to $33.5 million. Other industries with special definitions include mining, some types of manufacturing, agriculture, transportation and some specialty businesses.

The objective of government assistance to "small business" is to boost employment, add to economic growth and increase tax revenues. It is not to provide a job for a single individual. So, unless you are plannig to spend hundreds of thousands of dollars on printing machinery and expect to employ at least 100 people fairly quickly, you are not a candidate for small business government loans.

However, you will get more accurate information from your local SBA - Small Business Adninistration. If you don't know where their office is, visit your local library and ask to speak with the librarian. Public librarians are America's finest hidden information resource.

Good luck.

Steve B
08-14-2011, 09:04 PM
Stop by your local bank and ask for a small business loan. Most likely, it will be 100% based on your personal collateral and income from other sources. It is the banks that give the loans. Where the government comes in is that they might provide a level of guaranty to the bank. Or, for this small amount of money, you might also want to consider doing it with credit cards.

Dan Furman
08-14-2011, 11:50 PM
What Steve said...

There really is no money/capital for small business. The SBA may be able to help get a bank loan, but in general terms, if you can't get a loan yourself, the SBA can't do much for you.

Again, what Steve said - credit cards work real well here.

Spider
08-15-2011, 09:08 AM
Oh, yes - there certainly is government money for small businesses - and lots of it - in the form of loans and grants. The problem here, though, is What is a small business? A small business in government terms is still rather large. It is "small" in relation to "big business" which is a company doing billions a year in sales and employing thousands of people. One-person businesses, trying to start with no money of their own, are not going to contribute enough to the economy for public money to be spent on them.

However, the SBA is still a good resource and offers training and coaching for start-ups.

Dan Furman
08-15-2011, 10:59 AM
Yea, that's kind of what I meant, Spider - there is money available, but there's really none for these "I need 15k for a basement / garage T-shirt business".

steve4240
08-15-2011, 11:36 AM
Thanks everyone for the responses. I think I will look into SBA's and small business credit cards. In my business plan I have it written that phase one of the plan will start in my home. Phase on will last 6-18 months, depending on how fast I can get things going. This is so I can save money while building clientele and a following. For phase two I do plan on moving into a store front in a busy downtown area and hiring workers. So this is not really a "I need 15k for a basement/garage T-shirt business", but I understand what you mean. The reason I decided to start a print/embroidery business is because I am a street/skate wear clothing line designer and I have two of my own lines. I was loosing 6-9$ profit per shirt to have them printed by someone else and loosing 12-15 profit to have someone else supply and embroider my hats. I decided that if I become my own source for print and embroidery, and get my shirts and hats wholesale with a dealer license I will be doubling my profits and I will be able to offer these services as its own business. Thanks again for the info!!

KristineS
08-15-2011, 12:53 PM
If you are thinking of going into garment decoration, there are companies that do work with embroiderers and screen printers to help them finance machines and equipment. Beacon Funding (http://www.beaconfunding.com/) is one I believe. I know there are others as well.

Steve B
08-16-2011, 07:06 AM
Just for clarification - there's no such thing as "small business credit cards" (at least not for a start-up business). We're talking about using your personal credit cards to fund your venture.

steve4240
08-16-2011, 10:25 PM
Ok, I see. Well, I purposely do not have credit cards with those kind of limits on them. Thats why my credit is still good. I may have to look into Kristines plan and find out about financing for these machines. Thanks again.

rl3226
08-16-2011, 11:45 PM
There is a lot of good advise here it can be difficult to find capital to start a business, but not impossible. there are some options you can start by asking family and friends to invest in your business. This can be a good option but there needs to be a plan for the investors in regards to the return on the investment. You can also look to find investors in the community that might benefit from having your type of business in the area. Most communities also have an office dedicated towards business development you can find good information there in regards to local funding options and any government/private grants or assistance that might be available. Grants can be an option but you need to do your research when applying to one and its also a good idea to get to know the people who are managing the grant. Good Luck.

alphadore
08-26-2011, 05:29 AM
It sounds like a solid business idea though. I am sure you can easily attract banks to loan you what you need. In addition, most of your expenses will be spent on Fixed Assets. So, this makes it easier for a bank to loan you. If you can't repay, they will simply take the fixed assets.

Spider
08-26-2011, 09:30 AM
It sounds like a solid business idea though. I am sure you can easily attract banks to loan you what you need. In addition, most of your expenses will be spent on Fixed Assets. So, this makes it easier for a bank to loan you. If you can't repay, they will simply take the fixed assets.Unfortunately, it's not that simple. Banks do not want the fixed assets - they want to be paid back the money they lent. Assuming you are referring to the opening post, What will a bank want with a used t-shirt printing machine? They aren't going to start printing t-shirts!

No, they want their money and they will take as much precaution before lending the money for a so-called "secure" loan as they do for an unsecured loan.

alphadore
08-27-2011, 04:20 AM
Unfortunately, it's not that simple. Banks do not want the fixed assets - they want to be paid back the money they lent. Assuming you are referring to the opening post, What will a bank want with a used t-shirt printing machine? They aren't going to start printing t-shirts!

No, they want their money and they will take as much precaution before lending the money for a so-called "secure" loan as they do for an unsecured loan.

I guess I should have been more clear. Banks have higher preference to lend money to companies that have high fixed assets to revenue ratio towards companies with a lower Fixed assets to revenue ratio. This is an international practice.

As you mentioned, of course they want the money they lent back along with the interest. But this is not the case sometimes. When they are not paid by the borrower, they still have an option to take over the fixed assets. It is a loss for the bank as that item is heavily depreciated but still an asset. In addition, when they take back the fixed assets, they dont value at brand new price. So, the borrower still needs to come up with additional funds to close the loan. This is sometimes a win-win situation in the case where the borrower is bankrupt but cant dispose his fixed assets. Bank simply takes them over and values them for what they are worth at the time of the case.

You may see a common situation where most of start-up consultancy companies are not able to secure loans to fund their initial operations. This is because their primary assets are their expertise and experience in the field, which is intangible. If these borrowers make no payment back to the bank, then it becomes a bad debt to bank and eventually written off because there is nothing a bank can do except for lengthy legal proceedings.

Spider
08-27-2011, 08:58 AM
I realise that. I just don't want would-be borrowers to get the impression that because they have a few fixed assets that lenders will be more lenient in their lending requirements. If you happen to own a chemical plant or an automobile assembly plant, what you say is likely to be true, but the sort of fixed assets that a small/micro-business owns - like a T-shirt printing machine - will not make a great deal of difference, I think.

The most a small business person is likely to have in the way of fixed assets is the equity in their personal home or even a second home. Putting that up as security for a $10,000 loan may sway a bank to lend where they might not have done, but I cannot see many circumstances where assets pledged as security will benefit a small (micro-) business owner.

Diego
10-26-2011, 07:32 AM
I guess for 30K it might be better asking around your family. If you have a good relationship youŽll get better conditions that in any bank or government driven credit programme.

huggytree
10-28-2011, 07:40 AM
if you got the $15k loan and you have all your equipment and training....what if it takes 1-2 years before you make a profit? what will you live on?? or is this a part time startup?

if your going full time you may need $50,000 to cover your living expenses for a while

$15,000 is a small amount (to a business)...cant you just borrow against your house or from a relative???? or cant you just delay the startup for a while and save up $15,000????...maybe get a part time job at night for a year and bank all that money

jmansmc23
10-28-2011, 11:03 AM
I agree with huggytree, exhaust all of your options with friends and family. If you are still short, you definitely can get a PT job at night and weekends. If you make $10 hour and work 32 hours a week, after taxes you will have around $12,000 cash.

jadzigian
10-29-2011, 03:39 PM
I have been a commercial lender for almost a decade, and there is definately money for start-up/small business owners.

There have been a lot of great suggestions here, and in fact, you should visit your local SCORE office. You can learn more about SCORE here (http://www.score.org). In many of those offices, they employ retired executives who can help you with your plan and put you in contact with local lenders.

SBA programs are designed to help commercial banks get comfortable with the risks of lending to start-up/small business owners, and can help the owner obtain more desireable terms than they would be able to obtain conventionally.

Remember, that there are certain requirements any bank is going to want to look for in dealing with a start-up business. Primarily, most banks will want to see that outside sources of income is able to service between 70-90% of the proposed annual debt service of the loan. If you can't do that on your own, you may want to look for a partner who may be able to add some strength as a commercial guarantor.

Good Luck!

jbarnett
11-01-2011, 01:02 PM
It's extremely difficult to be blunt - especially at the moment as lenders simply do not want to lend in many instances - the economy has made a lot of banks very nervous so my advice is to sit down and take a long hard look at what you really need and what you could live without.

Essentially you'll be taking your financial plan and chopping it down to the bear-minimum. This might even mean looking at alternative suppliers to see how you can cut costs.

I'm sure you've undertaken quite a detailed plan so I won't try to lecture you but I would look at what forms of credit you currently have and look at extending them - i.e. credit cards, bank overdrafts, etc. You could also look at taking on a business partner to help take on some of the financial impact.