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Financing Your Craft Business

Finding Financing Is a Major Hurdle for Most Small Businesses

You’ve got a great craft product. It sells well wherever it’s shown. You want to take the next step and expand to something bigger and better.

Or you need extra money to supplement your family’s income. You are a talented artisan with an attractive craft to sell.

To open or expand a business, whether it involves crafts or not, requires financing – for the right tools, more supplies or the inventory you have to carry. If you want to rent a store or travel to more shows in a wider area, you need extra funds.

If you need employees, they have to be paid, payroll taxes have to be met.

Where does a small or just starting businessperson get the business financing, especially if s/he has no real way of knowing whether s/he will make enough to justify the expenses?

If you find yourself in such a situation, the first thing to do is sit down and prepare a business plan, including a detailed budget. Figure out where you are planning to go and how you are planning on getting there. Read the Four M's and the other business related articles listed in the For Profit section of this site to make sure you haven't missed anything.

Take into account contingencies, not only the unknowable such as accidents, theft, sickness or fire, but also items such as price or rent hikes, extra advertising costs, increased supply costs etc.

Only when you are totally satisfied that your plan has a good chance of success, should you consider sources of business financing.

Ideally, you should try to fund your startup business out of your own funds. If you already are selling your craft, plow your profits back into more supplies, more inventory or more tools. This way you are not really going out onto a limb. It might take longer to reach your goal, but you’ll probably sleep better at night.

If you’re just starting in business, you’ll probably find it impossible to get bank financing and the Small Business Administration will probably not be interested in backing you. Once you have established yourself in business for a while and can present an actual statement of profit and loss, these avenues will open up to you.

So how can a newbie get the business financing she or he needs. You can try to borrow from family or friends. Most people seem to just use credit cards. This is a very costly way of financing a startup and should be considered only as a last resort.

You can borrow against a whole life insurance policy if you have one. Some employee savings plans allow an occasional loan against whatever balance you have.

If you own a house, a second mortgage or line of credit is cheaper by far than most credit card debt, but be very careful. You don’t want to lose your house if something goes wrong with your business.

Finally, if you have a good enough credit rating, you might be able to obtain an unsecured personal loan or line of credit from your bank. While not exactly cheap, it is less costly than most credit card debt.

If you are a woman or belong to certain minority groups, you might find programs to help you get started through low cost loans. Check the yellow pages of your local phone directory or call your local city hall. They should be able to let you know if there are any such programs in your area.

Also buy the 2 CD set that outlines aide programs offered to small businesses by the US government. You just might find a program you qualify for, no matter who you are and the terms might be better than you’ll get anywhere else.

Proceed with caution. Be conservative. Take reasonable risks and don’t jeopardize your future or injure your family’s finances by borrowing money haphazardly.

With time, patience and hard work you should be able to succeed.

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Recommended Reading

When considering starting your own business, you need all the help you can get. Consider the advice and maybe even financial aide you will get from these resources.

Selling Your Crafts by Susan Joy Sager
An indispensable source of information for craftspeople on selling in today's marketplace, this unique guide not only gives tips and tactics for promoting and marketing crafts, but also provides the necessary forms and contracts for starting a business. You will learn how to devise a business plan, construct a budget and much more.

Financing the Small Business: A Complete Guide to Obtaining Bank Loans and All Other Types of Financing
By: Robert Sisson

2005 Guide to Federal Grants and Government Assistance to Small Business
2 CD set published by the US government.

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