Getting finance in the middle of a recession to start a business is not often easy, but the best time to start a business is at the bottom of recession, because there is nothing but growth from there on out. Now, it is true that it is almost impossible to time the exact bottom of the recession. But if you are just starting a business, you’re not expecting to make too much money in the very beginning, and you’re still working off your working capital.
If you have done a good job in estimating the cost to start the business with 100% fudge factor, it shouldn’t matter. Even if banks are not going to lend money for such a business undertaking due to what they perceive to be risk, you may find that vendors in the industry may help you stock your inventory, or even give you a loan to get started. Of course, no vendor in any industry is interested in giving you financing if you don’t have a solid business plan.
The type of business plan you might write for Vendor Financing would be different then the type of business plan you’d write if you are submitting it to a bank, and angel investor, venture capitalists, or a SBA Small Business Administration affiliated lender for a business loan.
A vendor wants to know what your level of sales volume you will have because they will lock you into buying their products or services as your main supplier. In trade for selling their products or using their services exclusively, they will be willing to give you funding.
Often, vendors in some industries will give no interest loans for facilities and equipment provided that they believe that over time they will make the money back through selling you your inventory, or by doing services for your company to keep it going.
You see, they are interested in a long-term relationship, a licensing contract, or distributor contract. And therefore, your business plan must consider this and spend extra pages and paragraphs on these topics. Please consider all this.
