Issue link: https://docs.hic.us/i/403552
is advisable to generate (with the help of an Attorney) a contract spelling out all of the details. C C h h a a p p t t e e r r 6 6 – – W W o o r r k k i i n n g g C C a a p p i i t t a a l l With most businesses, especially embroidery businesses, a source of cash is needed to buy products for resale. Typically, you will not maintain inventory, unless you are a retail Embroiderer. Instead, you will take orders, then purchase the goods necessary to fill the order. And since many of your customers don't wish to pay until delivery, you will need a source of cash for purchasing the merchandise. Developing Sources For Working Capital Very few banks are willing to loan working capital to startup's. There is simply too much risk. As a result, many embroiderers have resorted to a variety of creative methods to ensure funds are available for purchasing merchandise. Most new companies use the following methods to generate working capital funds: Personal Credit Cards Most suppliers to the Embroidery Industry readily accept credit cards. But you must be careful not to let this get out of control. If you are unable to pay the full balance at the end of each month, then you will incur interest charges, which can quickly get out of hand. And since most credit card companies charge 18% to 25%, the monthly interest fees can have a significant effect on cash flow and income. Establish Credit With Suppliers Some vendors will allow you to setup credit with them. However, they are not in the banking business and typically will require you to pay the full balance at the end of each month. If you cannot pay the full balance, then you will likely be turned over to a collection agent. And of course, your credit line will be closed and you will be placed on cash COD. Obtain A Revolving Charge Account With A Bank Most banks offer a variety of Revolving Lines of Credit, with the most common one being an Equity Line tied to your house. These accounts usually have a much better interest rate than a credit card, but you may be putting much more at risk. NOTE: Once you have an established business with a proven track record, there are more options available to you from lending institutions such as Banks. But as a Startup, your choices are limited. www.hsi.us care@hsi.us 63