Small business loans/ friends and family investing/ Thoughts, recommendations?

Have you looked into crowdsourcing? I have not done so but people seem to draw in good money doing so. GoFundMe and some others.

I personally NEVER lend to or invest with friends/family. If they need money and we have it, I give it as a gift. Money can destroy relationships.
 
12345678910 said:
If you need it, yes use a line of credit from a bank or credit union
However if you have no job, it's hard to get.
Reliable income is what they like.


A business should be able to self fund, with debt you run the risk of ever increasing debt.
Do you still have the original 6K ?
If you can't continue to self fund, you need to increase income or decrease expenses.

This is powerful - it's easier to reduce expenses that increase income.
"A penny saved is a penny earned", not really.
Net income, after taxes overhead and business costs come into play.
You have to bring in almost 2x the amount of new sales revenue to net the same amount.


Inventory turnover is important, move it through the system faster.
Look at cost accounting. What makes more; larger higher complexity high dollar woods, or smaller simpler, cheaper that move in greater quantity.
One man operations run up against time.
Consider some woods that sell in bundles, say 4x at a time to consolidate shipping and admin time
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Saving on expenses definitely impacts the bottom line much more directly than increasing new sales. Saving a dollar in expenses increases the bottom line by that dollar. If you have a 20% margin on sales, which is actually pretty good, it takes $5 in new sales to get that dollar to the bottom line which is still subject to taxation.
 
Boattale said:
If a bank won't loan you money, neither should anyone else. If a bank will loan you money, go that route and start building a relationship. I can tell you from experience there are three things every successful business needs - a good banker, a good accountant/CPA and a good attorney. The sooner you get those things going the better off you will be.

As others have said, loaning money between friends and family is asking for trouble and hard feelings. There's a reason that is said so often and that reason is it's true.

Good luck!
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This is the best advice in this thread.
Stay the course yourself.
At the same time - NEVER!!! depend on only one source of income to survive. Think big. Get another fire started.
 
Plus 1 on the suggestion about your inventory choices.
We wood junkies love wood. We see something amazing .. .say a camphor burl ... and just want it. But, if you are selling wood you have to decide what moves best for the buck. The camphor wood may be stunning, but if curly maple sells 10 times to every camphor burl block, don't buy it anymore. Decide what sells best ands expand you business that way. Too many choices can actually bog things down. Any inventory that sits on a shelf is unwisely spent money. If it sits on the shelf for a year, it is lost money.

I did a show a few weeks ago. I sold $6000 in handle material. I took probably 2000 handle blocks in 40 different types of wood. I had exhibition grade curly koa and ringed gidgee, but sold $20 dollars in curly and spalted maple for every dollar in those woods. Probably 75% of all sales were in assorted maple types and redwood burl. Many nice woods got no purchases at all. In the future I will take 500-1000 blocks of the five or six woods that sell best and leave the rest at home. Less work for more money equals good business.
Additional advice:
Pricing is very important. It is better to sell 20 blocks at a $5 profit each than to sell five blocks at a $10 profit each.
Don't fall in love with your inventory. It is there to sell, not own.
Don't buy what you like .. buy what sells ... even if you don't particularly like it.
Offer volume pricing. 10% off three blocks, 20% off ten blocks, 30% off twenty blocks.
If it isn't selling well, reduce the price by 25%. If it isn't selling after 6 months, reduce the price to cost. If it isn't selling after a year, reduce the price to half cost ( it is costing you money at that point).
 
Can't add to the excellent advise posted before me, I'll try to help with an additional question:

What are you doing to not need a loan again after being in business all these years?

I mean, you said that profits were reinvested to grow, yet, you still need more money. You think that this money will cover all the expenses of the expanded business or its just more purchasing power?

Pablo
 
I'll refer to the Notorious B.I.G.'s song, "The 10 Crack Commandments," which in my opinion is right about everything concerning self employment:

"Number 7, and this rule is so underrated, keep your family and business completely separated."

Concerning loans and money, I mean, not actual family businesses.

Caveat, I'm not good at business. But ultimately, I think it's best to owe nothing to anybody if you can do it, but if you must, have it in writing even if it's close friend or fam. It protects you and everyone else involved.
 
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I am looking into a line of credit from a bank.

The reason for wanting to borrow money is that I want to get into supplying larger volumes of wood. I love knifemaking woods and i plan to continue to offer them for many years to come. The issue is that the value per order is naturally limited. Im looking to begin offering things like burl slabs, luthier woods, and other larger volume pieces. At my current scale, knife woods are an excellent option, but i am looking to incorporate these larger pieces into my offerings.
 
You are pointing out a big problem with some businesses. If a person sells handmade pens that cost $5 to make and sells them for $30, he makes a huge profit on each pen. But, to make it a business that will support itself, and his family, he needs to sell 5000 pends a year ... every year. That is a lot of customer acquisition, which also is costly. Eventually you will run out of customers. Wood is better, because you get repeat and larger orders, but expanding in volume is still difficult.

Reminds me of an old story:
A kid had a lemonade stand by a busy road in LA. A man stopped his car and came over. He asked, "What are you going to do with the money?", the kid said, "I'm going to go to Disneyland with it." The man admired the youth's entrepreneurial spirit and asked, "How much is a glass of lemonade?", the kid replied, "$100." The man said, "You won't get many customers at that price", to which the kid said, "I only need one."
 
Hi Ben
I would avoid loans and partnerships with family and friends insofar as the building of the business is concerned. if possible try and source funds from the bank or other suitable professional institutions. Ultimately it will save you much angst and problems.

Telling the bank you can't pay them is stressful. Telling your family member or close friend you can't pay them and they may suffer as a result is a trauma you don't want to go through.
 
Before you walk in the front door, know where the back door is and exactly how you are going to get there. I’ve been a real estate investor my whole life and have used money from friends and family successfully. But I have always taken it extremely seriously. I would literally not eat before I’d miss a payment to anyone I owe money to. If you aren’t 100% sure you can pay them back and have a contingent plan - stay away.
 
Greenberg Woods said:
I am looking into a line of credit from a bank.

The reason for wanting to borrow money is that I want to get into supplying larger volumes of wood. I love knifemaking woods and i plan to continue to offer them for many years to come. The issue is that the value per order is naturally limited. Im looking to begin offering things like burl slabs, luthier woods, and other larger volume pieces. At my current scale, knife woods are an excellent option, but i am looking to incorporate these larger pieces into my offerings.
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Physically large pieces are either local pickup only, or pita expensive shipping.

Also look at selling to the pen and bowl turners

If it's not big enough to do a knife blank, you may sell it to the pen people, but as I said before, do package deals, move more and keep your revenue per transaction higher.
 
The above was correct. You need to be careful and always conclude contracts with relatives and friends. Ideally, it is better not to have anything to do with relatives in terms of business, finances, and real estate. I have a principle. I never borrow from friends or relatives and never do business with them. I had a very sad experience, so I made this decision for myself. If I need money, I would rather take a loan from a bank than ask my relatives. Also, if I need any help in planning finances or real estate, the first thing I will turn to is mcgeewm.com. I advise everyone to do this; otherwise, you will lose loved ones.
 
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I'm going on my 10th year in business. Here's my 2 cents for whatever it's worth:

Do not borrow money from family and friends. Do not.

Beware of predatory lenders. They're everywhere. They'll bankrupt you with high interest, oppressive payment terms, and various fees.

Try to go to your local bank and get a business line of credit. That way you use what you need, pay it back, and dip back in when necessary. A SBA loan is a good option as well.

Before you borrow any money, I strongly suggest you read "Profit First" by Mike Michalowicz. It helped me tremendously with my business financials.
 
One of the other wood handle material guys used to offer gift certificates at a discount. Buy a $250 card for $200, or offer 10% off orders over $200, etc to fund new wood purchases. I just bought my first 3 pieces from you and I am looking forward to them! I went with pieces I can get multiple handles out of so I can stay in the ~$30/handle range. I would love to get some of the fancier woods, but for non ordered stuff, I gotta keep the prices reasonable. I usually try to keep it under $40 a handle unless its a very premium blade or someone wants something spectacular.
 
Thank you for all the recommendations! I am also thinking of getting a loan to invest in my family business so that it can expand. I am struggling if I will be able to pay for my mortgage and the loan simultaneously. It is why I am not sure if I need this loan at the moment. The mortgage is more important for me because it permits having a house and a living place for my family. At least I know that I will be able to use the services of goodlifehomeloans.com and get a reverse mortgage, and invest the money I get in my business in the future.
 
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"Thanksgiving dinner just tastes different when you owe the people at the table money."

-Dave Ramsey (paraphrased)
 
Finding investors is the easiest way to expand you business. It will allow buying new machines for wood cutting and of course it will raise the quality of the products
 
A good marketing strategy was always a good idea for a business. You will start getting new clients and it will help you expand your business
 
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