Guide to Startup Financing for Manufacturing

Most entrepreneurs need to go beyond their own pocketbooks to start up their businesses or expand their operations. Many opt to tap into their personal networks, borrowing from friends and family. But in a capital-hungry segment such as manufacturing, these sources may not provide enough money to cover your needs. That is when it’s time for you to explore alternative sources of funding. Here are some of the financing options available.

Debt financing
Debt financing involves borrowing money from an outside source — such as a bank — with the promise to pay back the money borrowed within a set term, along with interest. Borrowers usually provide collateral, but in the case of manufacturers, banks may opt to use the equipment you lease or buy along with any raw materials and inventory as security.

In the event that you don’t have sufficient assets to secure a loan, consider the U.S. Small Business Administration (SBA) guaranteed lending program. The SBA’s program — also known as the 7(a) loan program — encourages lenders to make long-term loans to small businesses by providing a guaranty. It promises that the U.S. government will reimburse the lender for its loss if the borrower defaults.

The basic 7(a) loan guaranty can be used to provide working capital or to finance the purchase of machinery, equipment, furniture and fixtures or land and buildings. For expanding or modernizing, there is the certified development company loan. You can use this long-term, fixed-rate loan to acquire machinery, equipment or real estate.

Equity financing
Equity financing involves giving an external investor or business partner part ownership in exchange for cash. The main difference from debt financing is that you relinquish some control of your company in exchange for the funding. Keep in mind that your investors may want dividends or a portion of profits in exchange.

The most common source of equity financing for small businesses comes from friends and family, but another source includes venture capitalists. That said, venture capital may not be an option if you’re in the manufacturing sector — venture capitalists tend to prefer early-stage, high-growth companies in the biotech or technology sectors.

Equipment leasing
Buying or upgrading equipment can be a substantial expense for manufacturing businesses. If you don’t have a pile of cash sitting around, consider equipment leasing.

Leasing equipment has several advantages. For one thing, it allows you to get up-to-date technology without eating up precious capital. That will keep you financially solvent and competitive. But equipment leasing may not be for everyone. You’ll have to decide based on several factors, including the type and use of equipment and your long-term capital and credit demands.

You can learn more about equipment leasing through the Equipment Leasing and Finance Association.

Peer-to-peer financing
Another form of financing is peer-to-peer financing. Essentially another form of debt financing, peer-to-peer financing mimics the traditional lender and borrower structure, except you have individual lenders — or groups of them — instead of banks and financial institutions. By cutting out the middleman, borrowers can get money at lower interest rates than what banks offer. Prosper and Zopa are two peer-to-peer lending services available in the U.S.

Peer-to-peer financing can be a useful alternative, but as with borrowing from friends and family, the amount of financing may not be enough for a capital-intensive manufacturing business.

Obtaining financing
Regardless of the type of financing you choose, one thing is certain: You must have a well-constructed business plan. In general, a good business plan for a bank loan should include the amount of money you need; how you plan to use your funds; how the loan will benefit your business; the requested repayment term; and a list of the collateral you’re offering as security.

As a manufacturer, your business plan should also include planned production levels; overhead costs (preferably compared to industry average); prices per product line; anticipated or actual gross profit margin; production limits of the planned physical plant and equipment; purchasing and inventory management procedures; and any new products that could provide additional revenue.

Once you’ve put together a well-researched plan, run through the SBA’s loan application checklist to make sure you have everything covered. Then make sure you have a certified public accountant or attorney look it over to make sure it’s airtight.

Ashir Badami is senior editor at Business.com, the web’s largest business-to-business searchable directory and home to more than 35,000 business how-to guides.

Find financing services and providers at Business.com, the internet's largest business-to-business website. Business.com reaches 40+ million users monthly online and is home to more than 35,000 how-to guides that help small-business owners solve problems and find opportunities.

Tips for Marketing an Ecommerce Site

Whether you are planning to sell online for the first time, or are tuning up and re-launching an existing e-commerce site, drawing visitors to your website is a challenge. Some traditional marketing strategies actually translate well to e-commerce, such as promoting to places where you know your customers congregate (either online or in the physical world). If you have a physical store, review what has worked there and morph those activities into your online efforts.

One of the biggest hurdles in online marketing is keeping visitors on your site long enough to buy something, says Jean Van Rensselar, a Chicago-based marketing expert. At a store, they’ve already made a time investment to be there and are less likely to walk out. Online, however, there’s no such investment so the quality of your site will make or break your online business. With a single click, potential customers can bolt. Here are some tips for marketing an online store and some errors to avoid:
Organize and optimize your keywords and keyword phrases: These are the exact search terms that people are likely to use in the real world to look for the products or services that you sell on your e-commerce website. Put this on your to-do list well ahead of launch. “You should start on keyword optimization 60 days before you publicize the site,” says Van Rensselar. “Optimizing” means selecting your keywords carefully and placing them strategically into every online and offline piece of marketing material you have.

Create awareness: Potential customers need to know they can buy from you online. “Don’t assume your loyal brick and mortar customers will figure this out,” says Van Rensselar. “And don’t assume other prospects will just bump into you online.” If you have a physical location, leverage that first to gain awareness among visitors. One basic but effective strategy is to place signs in the widows and inside the location announcing the site. You can also hand out coupon-bearing flyers and place them into every bag or box.

If you don’t have a physical location, the best way to create awareness quickly is to place pay-per-click search ads on Google, the yellow pages site serving your area, specialized sites such as Business.com and elsewhere. If you are short on funds, Van Rensselar says you can limit this to about six months just to get things started. Other options include sending announcements via press release, email, direct mail or Twitter.

Drive traffic to your site: Knowing your site exists isn’t enough – potential visitors need a compelling reason to go there. “Promise them it will be worth their time,” says Van Rensselar. Make every page interesting and easy to navigate. Each page needs to be no more than one click away from your online store. Include something noteworthy on each page – such as a tip that can make their life a little easier. For example, a pet store might advise, “Did you know that a $15 mat comb will remove most mats from your dog’s coat easily and painlessly?”

Make it about them, not you: If your web pages are nothing but self-serving spin, people won’t come back, says Van Rensselar. Maybe not ever. Consider creating separate pages that educate visitors on each product or service category you cover. Such features encourage visitors to stay or return to your site. Make it quick and easy for visitors to contact you with questions or comments if they need help.

Convert visitors to sales: Don’t worry that visitors will resent your trying to sell them something. Quite the opposite. That’s why they are there, and most fully expect that your business has to make money to survive. Your goal is this, says Van Rensselar: After prospects have browsed your site, you want them to think: “I can see that you know what you’re doing and I trust you. I appreciate your help and it would feel good to buy something from you right now.” That means you have to make it easy for them to do so. Here’s how:

•Make product selection easy.
•The checkout process should be quick and seamless.
•Be clear and upfront about shipping costs and choices.
•Show them ways to save money if you can.
Don’t waste time trying to figure out how to make visitors buy, suggests Van Rensselar. If you give visitors smart reasons to buy instead, you will see more sales.

Guide to Finding an Accountant or CPA

When picking an accountant for your business, choose wisely because you'll be sharing some of the most sensitive and intimate details of your business with this person. You'll be relying on your accountant to help you keep your finances in order, your books balanced and your taxes filed properly and on time. Finding the right financial professional for your business is a task that you should approach seriously and thoughtfully to make sure you find someone you trust and who meets your needs. Hiring a good accountant or CPA can help you:
1.Keep your company's finances running smoothly
2.Meet your tax obligations properly
3.Watch for unusual or improper financial transactions
4.Avoid tax audits
5.Do long-range financial planning for your business
Action Steps
The best contacts and resources to help you get it done




Get recommendations or locate an accounting pro online
Referrals are an effective way of finding an accountant in your area. Ask business associates, your banker, your financial planner or your lawyer. You might also want to get referrals from accounting associations or online databases.
I recommend: For online searches try Accountants World or CPA Directory.

Decide what services you need
Start your search with a clear picture of what you want your new accountant to do. If all you need is help filing your taxes, you may need no more than a tax preparer. But if you're like most business owners, you'll benefit from an accountant who can prepare financial statements, conduct audits and perform other financial chores.
I recommend: See "Working With Your Accountant" for a discussion of business financial tasks, including those you might want to do yourself and others you would likely want to have an accountant do.

Interview candidates
Once you know what types of services you want, start lining up candidates for interviews. It's a good idea to interview several candidates so you can compare services and costs. Your ideal candidate should not only know accounting but also should have some familiarity with your type of business. You also need to find someone you feel comfortable sharing your finances with.
I recommend: For help in interviewing candidates, see SCORE's list of essential questions you should ask. Inc. Magazine provides additional tips for the interview process.

Get written estimates
You want to hire the best accountant you can, but also stay within your budget. Accounting fees vary widely, depending on the size of the firm, the expertise of the accountant and the level of service. Once you have all your written estimates, evaluate and rate them.
I recommend: Most spreadsheet programs, such as Microsoft Excel, can be used to create a grid for evaluating various aspects of the estimates you receive. Try to rate each candidate in specific areas and then give each one a final score.

Sign an engagement letter
When you've decided on an accountant, you'll most likely enter into an agreement for services called an engagement letter. This document, usually drafted by your accountant or CPA, sets forth what services will be provided and at what cost. Some smaller accounting services still operate on little more than a handshake agreement. An engagement letter is more typical today. Be sure you read and understand the contents of the engagement letter and that you agree to the terms and conditions.

Guide to Wholesale Clothing

Find the best prices on wholesale fashion apparel for all your company's needs
By LaRita Heet, Freelance Writer, Journalist, IBT Designer, LMH Communications

Wholesale fashion apparel is important to a variety of businesses for different reasons. Whether you’re looking for employee safety wear - or wholesale fashion apparel to retail in your boutique - clothing wholesalers are valuable resources for your immediate or ongoing wholesale apparel purchase needs. Find clothing wholesalers that offer high quality, low prices, and a strong reputation.

Here are the top three considerations in purchasing wholesale apparel:
1.Wholesale apparel distributors offer a wide selection of wholesale name brand clothing styles and choices for a variety of small business applications.
2.Purchase wholesale name brand clothing at great discounts through wholesale clothing distributors for an increase return on investment.
3.Many wholesale clothing distributors offer wholesale apparel designed for specific industries.



Action Steps
The best contacts and resources to help you get it done




Find wholesale name brand clothing at discount prices
Look for the top brand names when you shop wholesale fashion apparel distributors. Check out the wholesale clothing vendors' exact offerings, though, since some offer "off-price" apparel, including wholesale name brand clothing closeouts and irregulars.
I recommend: Lots of Wholesale sells off-price wholesale name brand clothing galore, from such brands as Banana Republic, American Eagle, Hugo Boss and more.

Find clothing wholesalers who offer industry-specific clothing
Sometimes specific industry standards require specific types of clothing. To comply with the American National Standards Institute, you'll need to purchase ANSI-compliant, high-visibility safety wholesale clothing.
I recommend: IndustrialSafetyGear offers two "high-viz" wholesale apparel lines, which provide wholesale clothing, hats, gloves, safety vests, and more.

Buy blank wholesale t-shirts from clothing wholesalers
Blank wholesale t-shirts purchased from wholesale apparel distributors are ideal for so many applications - whether you're looking at casual wear for your employee team-building days, wholesale t-shirts to memorialize a particular day/event, or simply blank wholesale t-shirts you can personalize with your company logo and give away. Presto, you have free advertising!
I recommend: Pima Apparel is a wholesale clothing distributor offering dozens of styles of wholesale t-shirts - including raglan, ringer, boatneck, crewneck, and more; they offer 24/7 customer support to all customers. At Blank Shirts, get factory-direct wholesale t-shirts and apparel, including wholesale name brand clothing, accessories, and discounted clothing for men, women and children.

5 Keys to Funding Future Business Growth

While many businesses have been slammed by recession, some entrepreneurs are using the downturn as a time to prepare for better times ahead. And a big part of that is not only getting your current balance sheet in shape, but lining up funding sources to support future growth.

It starts with understanding the different options, and that alone can be challenging. When American Express surveyed a group of small business owners recently, it found that many were having trouble separating financial fact from fiction.
For example, Amex found that 34 percent of business owners surveyed believed, incorrectly, that a business “term loan” (funded immediately for a set term and amount) and a “line of credit” (which you open and tap as needed) are essentially the same. And nearly 40 percent believe it’s a good idea to apply to as many lenders as possible when seeking a loan, when the opposite is true. Multiple applications can tarnish your credit rating.

Here are five things you should know about financing that can help position your business for future growth:

1. Reinvested profits are perfect. The best source of “venture capital” for an existing business is money your company is already generating. Many entrepreneurs miss growth opportunities by spending profits in unproductive ways. Others take the opposite extreme, pumping every penny into the business while taking nothing for themselves. Both can backfire. If you do need to seek a loan, bankers will prefer that you pay yourself a reasonable salary. They want to know the business can be profitable even if those running it get paid.

Reinvesting profits in your business is a key to successful long-term growth. This is “patient” capital that builds value in your business without debt and without giving up shares to others. About 46 percent of business owners surveyed by American Express said they planned to finance their growth by reinvesting profits.

2. Tap into trade credit. “Trade credit” describes the process of delaying payment for goods and services your business purchases from various suppliers and vendors. You may find vendors more than willing to sell on credit to a growing business – and even to a startup – if you can strike a long-term deal to buy from them.

And from your perspective, trade credit is also one of the safest forms of business borrowing. Bank debt is dangerous because payments are still due even if sales drop. But if sales drop so will your orders, so your level of trade credit will drop too.

Right now, trade credit may be more readily available than bank or other types of loans. And it lets you spread payments over months or even years with little or no down payment and generally favorable rates.

3. Line up credit lines early. The time to establish a line of credit is when you have the ability to qualify for one – not later on when you need it. Having a line of credit can help you growing by providing ready financing when opportunities arise. A line of credit is also vastly preferable to using corporate credit cards that generally carry much higher interest rates and increasingly onerous terms. But avoid using a credit line to bail yourself out of trouble. Lines are meant to be tapped as needed, then paid off so they are available again the next time.

4. Expand banking relationships. If you have accounts with only one big bank, consider opening additional accounts at a regional or community bank. That will give you more options when it comes time to look for loans, lines or other credit to support your growth plan.

5. Consider alternative loan sources. A few options include credit unions you may be eligible to join, accounts receivable financing (also called factoring), and so-called “peer-to-peer” lending. Peer-to-peer (or person-to-person) lending has taken off in the recession as traditional loan sources have dried up and new Internet sites have made it easy to apply for and obtain this type of financing