Look for Lenders That Serve Your Needs
Question: My motorcycle repair shop has had sales of more than $1 million for the last three years. I need a small business line of credit to buy inventory, but I declared bankruptcy in 1997, and banks are turning me down because of it. I have a good credit score now and own a home. Where can I turn for funding?
Answer: Don’t give up on banks until you’ve approached several that specifically serve the small-business community. You’ll need to present your business plan, including information on your company’s financial history and growth potential. You might also consider bringing in a cosigner on the loan. If you need help putting together a plan, contact a local Small Business Development Center, www.sba.gov/sbdc, or an office of business counseling service Score, www.score.org, to find free or low-cost assistance.
There also are lenders that specialize in less-than-bankable small businesses in economically distressed areas, said Jim Anderson, a consultant at Score’s Orange County office. Check out the National Community Investment Fund, www.ncif.org, for more information and local resources.
If you’ve given business loans your best shot without any luck, investigate a home equity loan, Anderson suggested. “Lenders look at the value of the owner’s equity ... and make loans on this basis,” he said. One other plus: Home equity loans generally carry lower interest rates than do business loans.
With healthy sales, your company may be attractive to lenders that provide alternative financing. “Factors,” for example, lend money for cash-flow purposes secured by a company’s accounts receivable. “Purchase-order financers” provide capital to fill orders from creditworthy customers. Some of those lenders may not work with retailers, however, and all of them will charge you a hefty interest rate. Calculate your options carefully.
Finally, don’t forget about friends and family.
“We have clients who are able to borrow money from a relative or someone else,” Anderson said. Sometimes, the ties that bind can help you get out of a bind.
Local Apparel Industry
Not Dead but Changing
Q: I’d like to start a service business related to the garment industry, but people are discouraging me. They say apparel is a dead industry. Is this true?
A: Apparel is anything but a dead industry. However, it is an industry undergoing transformation.
“Because of its cheap labor, Los Angeles used to be the center for inexpensive clothing sold to chain stores,” said Paul Ratoff, a consultant with Strategy Development Group in Placentia. “As more of the sewing and processing has moved out of the United States, Southern California has become the center for fashion, sportswear and active wear. The focus has shifted from manufacturing to sourcing, design, merchandising and marketing -- all supported by technology.”
Apparel is one of five key industries in Southern California and provides nearly 140,000 local jobs, Ratoff said. The Los Angeles apparel market is the largest within the U.S. in terms of employment, according to the 2003 Los Angeles County Business Patterns survey.
Rather than worrying about the size of the market, you should be thinking about what kind of competition your new business will face.
“To be successful, you will need to hit the ground running with a strong competitive advantage and a great team to put it into action,” Ratoff advised.
Again, you’re in the right place at the right time. Fashion Business Inc., www.fashionbizinc.org, is a nonprofit organization in the heart of the downtown Los Angeles apparel district. It is designed to help entrepreneurs by providing business intelligence and training to start-up apparel manufacturers and service firms in the Greater Los Angeles area, Ratoff said
Got a question about running or starting a small enterprise? E-mail it to karen.e.klein@ latimes.com or mail it to In Box, Los Angeles Times, 202 W. 1st St., Los Angeles, CA 90012.
