# Denied Business Loan - Need to re-do business plan



## concrete5 (Apr 8, 2015)

My wife and I are looking to start up our own t-shirt business and we were just denied a business loan from a local lender. While I can look at other lenders, I want to address some of her concerns in our next pitch...no matter who we go with as a lender.

I am planning on a heat press, vinyl cutter as the lion share of our business, which will be personalization of garments. We will also get an entry level Riley Hopkins Jr. press kit to do screen printed designs that I have come up with (or purchased). We also need to do a website with client option to do personalization to a shirt (vinyl heat press), along with back end order information and stock information/sales reports (ie: best selling shirts, designs, etc).

This loan officer really didn't seem to think that anyone could make a living selling t-shirts when a buyer could go to Old Navy or Wal-Mart for a shirt. In fact, she kept repeating "I just don't think you're going to get the sales".

We felt we had a robust marketing plan, and the loan officer didn't. We had specific plans for targeting print material that was relevant to our target market (local and national magazines), attending local and near by conferences, tradeshows and events that would be attended by our niche market, and lastly, active social media channels. Our loan officer said "So, you print ads, go online and do a bunch of social media things....and then what? cross your fingers?". 

My Questions: 

Where is the best place to do market research to see how much sales a t-shirt website can do? I am hoping that our website will be in the $120k/year range in sales...with the understanding that it will take time to work up to that. Is this unreasonable? 

Where do you do your market research? We have recently done a surveymonkey earlier this week and posted it to one FB page and so far have received about 100 responses. I would like to get 300-500 responses from our niche market, but so far I feel good about this process. Our business consultant said he would do our market research as part of our business plan, but he did a really poor job of it and essentially posted some news articles that said on-line shopping is a really big industry.

Are there any Canadian t-shirt business owners (on-line store) that would be willing to do a short survey/info session for me? I am new to business and the shirt industry, but my wife and I are motivated to do this business. The loan officer seems concerned with our lack of business experience, marketing experience, etc. I was hoping that if we had some examples of other Canadian business owners that could state how much t-shirt industry experience they had prior to their business start, how easy/difficult it is to get started in the business, as well as ballpark some financial numbers in sales and profitability. 

Lastly, I have had trouble in finding a local web developer that can do the sort of personalization t-shirt website that we want. Many haven't responded to my inquiries, a few I've phoned said they're too busy or that my project isn't their cup of tea. Has anyone used freelancer or one of those other websites to get a website developed for them at a more reasonable price?

Thanks for taking the time to read.


----------



## ericsson2416 (Aug 29, 2007)

Hey Trevor

It sounds like you are on the right track of doing the research. Out the gate with a heat press and vinyl cutter as your main income I could see why a loan officer would be hesitant. Rolling 120k a year you would need over $300 in sales per day working 365 days a year to make it. That's a lot of vinyl, especially the first year if you were trying to support you and your wife on just the sales from the business (once you account for outside costs and overhead). Were you planning to buy or rent a place or were you going to be competing online for customers?

Another consideration would be the population where you plan to open. In our town of 20,000+ there's three printers all fighting for business so every bit of market share has been earned for us. Online you'll be competing with players like the custom - ink website that drives the price down and has a huge budget as well as other "local" players with a large marketing budget for online.

I'm not saying it can't be done but the personalization we've found is labor intensive and usually low quantity. You would need to have a rock solid plan on where you're going to find the customers and have them continuing to come back. Even doing shows every weekend you would need to roll some serious sales 52 weeks a year to cover your travel expenses on top of making up for slow weeks. 

If you are serious and committed I would save up for the vinyl cutter and Hopkins Jr. and purchase them without the loan and run them out of a spare bedroom or garage so you don't have the expenses of a shop. That way you can learn the ropes without having to worry about paying the rent. That's how we started, five years of establishing a customer base and our market through garage sales then when we went for a loan for our storefront we had solid numbers that they couldn't ignore.

Best of luck

Eric


----------



## Mtnview (Nov 5, 2009)

To add to Eric's information, you need to address the loan officer's mentality comparing your intended operation to Wal-mart. If you are offering custom printing in your area then I don't know any Wal-mart offering that. The loan officer is comparing apples to oranges. You will be competing with other print shops in the area. The proposed online ordering part you seek is a little different. You would then be competing with companies all over Canada and the U.S. Even selling your own designs online you are competing with tons of other sites selling their own designs.

In addition to trying to figure out how to better present your current plan think about reducing what you desire right out of the gate & hence reduce the amount need to request from the bank. Maybe table the online custom ordering initially until you get a better feel for the business and see how finances will go. If you want to sell shirts with just your design (no customization) it is cheaper to go with one of a number of e-commerce sites that you can customize a template and load you products.


----------



## jfisk3475 (Jan 28, 2011)

Our lender wanted to know our projected sales for the years 1 and 5 could be. What's the market in our area. What our overhead is. But of course it took some research. Not every shirt company willing to help you with that info. So we went to local supplier and he told us how much companies are buying and we did the math. If it fails again get personal loan. We just got a 20k to expand. 

Sent from my SM-G900T using T-Shirt Forums


----------



## Maxcat (Nov 23, 2014)

Since I'm 99.9% sure you are going to be personally responsible for any business loan you get why not consider a personal loan?

I've owned/started several businesses and funded them all myself. I was never able to obtain any type of business financing on a new business. I think if you google financing for a start up you'll see how difficult it will be.

Unfortunately, your most likely financing options will be credit cards, personal loans, friends, family. 

Best of luck and please let us know if you do find financing that is available for a start up.

Additional thought, maybe look into equipment leasing to cover at least some of the stuff.


----------



## jfisk3475 (Jan 28, 2011)

Maxcat said:


> Since I'm 99.9% sure you are going to be personally responsible for any business loan you get why not consider a personal loan?
> 
> I've owned/started several businesses and funded them all myself. I was never able to obtain any type of business financing on a new business. I think if you google financing for a start up you'll see how difficult it will be.
> 
> ...


Max cat

One problem we have found is most leases are not a good thing for start. You're paying double the cost of the equipment and they say no penalty for early pay off but you still pay double in the end. We wanted to lease purchase our mutoh printer. With down payment the end lease would be 8,000. Final lease would be 17,000 at the end of lease or at early payoff. Best thing is personal loan. Leases are loan sharks minus mofia. Lol. 
Sent from my SM-G900T using T-Shirt Forums


----------



## NoXid (Apr 4, 2011)

*First rule of banking:* Never lend money to anyone who actually needs it. You probably think I'm just being cute. I'm not.

There are already big players doing custom online T-shirts. That does not mean you can't add yourself to the fray, but it takes money and resources to get noticed online, and the existing players have a head start. In the custom market you are marketing a service, not a product, so what would set you apart from the others? The big operations will have DTG, so can do full color photographic art of people's grand kids, dogs, whatever.


I suggest something along the lines of the following, but only you know the full circumstances, goals, limitations, etc of your situation, so take what works and ignore the rest.


Focus on the local market for custom work. This is where you have an advantage over the big existing online custom shops.
Market your own unique designs on Etsy. It costs almost nothing to setup, and the % cost when you have a sale is reasonable, as Etsy actually helps drive business to you (cheaper than Amazon, and easier to deal with).
You can also market custom variations on your designs on Etsy, like including the name of a particular person, or whatever. Or even let people send you their own art that you will then cut and press onto a shirt. You don't need a complicated and expensive online design tool to produce what most people want in a custom T-shirt.
Look locally and online for barely used equipment. Lots of people go out and buy brand new equipment and then give up and sell it on Craigs List or ebay or in the Nickle Ads. It pays to be on the smart end of that, if possible.
Keep your initial expenses to the minimum needed to get your feet wet. You can always buy a better cutter/press/whatever if demand necessitates it.
Assume that you will constantly make "mistakes" and need to adjust your plans. Adapt or die. It is not a fatal mistake as long as you learn from it and did not gamble everything upon it. Everything will take longer, cost more, and turn out different than you expected . . . so expect it!


----------



## Printor (Apr 16, 2015)

It's easier to get a loan for a new restaurant than for this biz. The market is flooded with almost new equipment for a good reason. I would concentrate on the personal loan idea. If you don't qualify for that, the biz loan isn't on the table any way. With a little success in the first year or 2, it will be much easier to get a loan for expansion. For what you want to do, you can get started for a lot less than you think, (equipment wise) This forum is full of helpful people with experience in getting started with low cost, used, or DIY tools.


----------



## iebriggs (Jan 26, 2015)

Just got approved for a lease on $23,000 worth of equipment. Putting 20% down along with two months payments. The two payments go to the end of the loan. Loan is 36 month lease with a 10% purchase at the end of the loan. We will be paying about 5 grand in interest over the life of the lease. 

The benefit is we can write off the monthly lease payments against our business. All they did was run out credit and approved us with a purchase quote from the company we are buying from. I did not have to explain my business plan at all to the lender. 

Send me a pm and I will give you the name of the company. Do not want to get accused of self promotion.


----------



## concrete5 (Apr 8, 2015)

Thanks for the responses so far!!

I was thinking that the sales might be a bit of pie in the sky thinking for the first year or two (three? four?). But, I do think that they are attainable.

Here is some more information:

1. We live in Metro Vancouver, BC...which has a population of over 2 million people. 

2. We were looking to get a good start to the business with financing to help with the website, brand & logo design, marketing budget, and some stock of vinyl & apparel. That is why we were seeking financing with getting started. If they don't believe in the business plan, then we can start smaller and buy our own vinyl cutter/heat press & Hopkins kit.

3. I could pursue a personal loan, but living in Canada there are a few government programs that help with Entrepreneurship and starting a business. Local companies get contracts from the provincial and sometimes federal government to assist people with starting up a business. They do this in an attempt to create jobs. This Capital Corporation I was in touch with was doing a combination of government program (they are supposed to be able to help with cost of business plan, mentorship, as well as a possible grant) and commercial lending. I sought assistance from this company in order to access the business plan assistance (which was useless, the guy I was set up with said it would be quick, and took him months to write. In the end, he did a half *** job). So that leaves mentorship and a possible grant. If their mentorship is anything like their business plan assistance, then I'm only interested in the possible grant. Unfortunately, the company does a % as a commercial loan, in addition to the %'s of owner equity contribution and government grant.

While I don't agree with the loan officers decision, I do realize that the business plan wasn't done as well as it could have been and didn't spell out what she probably wanted to see. That being said, even when I filled in the gaps, that didn't seem to resolve her concerns. (As a side note, I sent in a complaint to the manager about this loan officer. I pointed out that she was very unprofessional with me - at one point she laughed out loud when I asked to discuss her concerns about my experience and education. There were two other issues I had with her being overtly rude and unprofessional with me. The manager is back next week...we will see what comes of the complaint.) 

4. Next meeting I will have with them I will address her written concerns (Whether they are with her or another business loan officer), as well as have information about custom/personalized apparel vs. stock apparel at Wal-Mart, gap, old navy etc. 

5. My wife & I's survey monkey is doing well. My wife is the type of person we will target...Mom, kinda crunchy (eco friendly, concerned about fair trade, living wage, organic fibers) and wants to buy apparel for her family members that is personalized for special occasions. We recently went to Disneland and saw a ton of families wearing matching vacation shirts & family matching family reunion shirts. The survey that we created was posted in half a dozen of the facebook groups she chats in and posts in...and we now have over 300 responses. I will be sure to print off this report and bring it to our next meeting with a loan officer.

6. I will be looking for a supplier of living wage/sweat shop free garments in both kids and adult sizes...prefer with tear away tags for relabeling. Any suggestions? 

Thanks again!!


----------



## brembroidery (Aug 30, 2014)

If you starting out the first loan or lease is always the hardest. Lease companies get a bad rap but they put the equipment in the shop fast. You can go to the bank deal with Sba loans etc and a lease company will have u running equipment before the bank can even turn u down. You pay for it sure but it's a tax write off. If you took on a partner to get cash u give up some control and profit to them. They know the business and know the equipment


----------



## annagreenang (Jun 25, 2018)

brembroidery said:


> If you starting out the first loan or lease is always the hardest. Lease companies get a bad rap but they put the equipment in the shop fast. You can go to the bank deal with Sba loans etc and a lease company will have u running equipment before the bank can even turn u down. You pay for it sure but it's a tax write off. If you took on a partner to get cash u give up some control and profit to them. They know the business and know the equipment



Thanks for the info, im also looking to get a loan now i will prepare myself for it.


----------



## DTGnewbie2018 (May 27, 2018)

Eric made some very great points. In 2018, if your marketing plan does not include social media you will be at a serious disadvantage. Consider opening a Twitter/FB business account. It’s an easy way to reach customers, and offers ways advertise your products.


----------



## printsfordays (Oct 6, 2017)

What is the bulk of the loan going to be spent on? You may find that you can get the decorating side up and running for relatively cheap if you start in the space you are already living in.


Just figured you could go for a much smaller loan without the need to pay rent and or mortgage on a new space. Not sure if that is an option for you but if it was you could always start producing and selling from your home to build a stronger case to present to the loan officer.


edit*** i see that you have already thought of this.


----------



## ecp in vt (Nov 23, 2016)

Banks like collateral. Logos, websites, marketing do not constitute collateral. Low cost/low value equipment hasn't much value, either. That leaves receivables. Without some real firm sales numbers for them to crunch you won't stand much chance of a business loan.


----------



## Kingduck80 (May 21, 2020)

I have a question I’m just starting a t-shirt business. I have all of my paperwork I’m just wondering what’s the best route to go for getting shirts and equipment. I have been approved for equipment, however they are charging a lot to finance. The equipment cost is $11,099 but if I finance I’ll be paying close to $19,000. I need help finding the best options for purchasing equipment.


----------



## Kingduck80 (May 21, 2020)

I have a question I’m just starting a t-shirt business. I have all of my paperwork I’m just wondering what’s the best route to go for getting shirts and equipment. I have been approved for equipment, however they are charging a lot to finance. The equipment cost is $11,099 but if I finance I’ll be paying close to $19,000. I need help finding the best options for purchasing equipment.


----------



## binki (Jul 16, 2006)

All bets are off right now however try your local bank and see what they say. We have had 4 loans (one is current) over the last 10 years for equipment all they ranged from 4% to 7%.


----------



## LancerFlorida (Mar 20, 2018)

The best place to start is binge watching SHARK TANK.
The questions they ask the business owners are incredibly purposeful.
Even more important is the 'facts' offered that are nothing but wishful thinking and conjecture.
And they always seek the history of the candidate to understand if this is their FIrst Rodeo (in garments and apparel). It is helpful to note the 'gold' in finding funding is existing SALES. This is quickly followed by sales acquisition costs? Cost of goods? And finally margin.
IF a business owners seeking funding can't pass the SHARK TANK test, they are not ready for prime time with a lender.


----------



## LancerFlorida (Mar 20, 2018)

King, you are looking at the wrong data.
If your business is generating $2,500 to put in the bank, it seems then new equipment investment should raise that income to lets say $3,500 a month.
Are you unwilling to pay $350 a month to make $1,000? You are a business owner, focus on profit not cost.


----------



## Wiziard (Apr 29, 2021)

My advice, don't take out a large amount of loan and start small. That way, you'll at least know if your business will be successful or not.


----------

