Sometimes it takes money to make money. Most sellers start their businesses with very little cash, but reach a point in their growth where they need access to more money to achieve their goals. There’s no doubt that loans can be intimidating and scary. This post is intended to make the whole world of capital access a little more approachable.
Before You Get Funding
First, consider your goals and your budget:
1. Know your goals
What are your business goals? You have to know where you want to go before you can figure out how to get there! Try to put your goals in financial terms, such as: “I would like to sell enough to make $x this year.” Avoid the tempting trap of making loose goals, like: “I want to make as much as possible.” I’ve found that it’s much more useful to create a few smaller goals than one big one. For example, you can easily turn “I want to make as much as possible” into “I want to make $x next month; $y by the end of the year; etc.”
2. Know your budget
Once you know where you want to go, think about the path to get there. If you want to make $x this year, how much money do you need to spend? Maybe you need a new piece of equipment to make your production more efficient or maybe you need to run a big marketing campaign to drive traffic to your shop. Be as specific as possible with your budget and research costs thoroughly so you aren’t guessing – there’s nothing worse than finding the money to get a new piece of equipment and realizing it actually costs more than you thought.
3. Be cost efficient
Go back over your budget; what do you really need to spend to reach your goal? It’s easy to think that you need to spend more money than you really do to reach your goals. Here are some common mistakes to look for:
Tina of Better Off Wed saves money by using equipment in a co-working space. Read more in her Featured Seller interview.
- Overpaying for materials or equipment – A brand new, top of the line sewing machine would look great in your studio, but is it necessary to reach your goal? Could you share equipment costs with neighboring artists, barter a trade with others on your team for used equipment, or use equipment at a co-working space, like Tina from BetterOffWed? On the materials side, are you getting the best prices by buying in bulk?
- Overpaying for marketing – Sometimes the best marketing is free. Before beginning to raise capital for a Super Bowl TV spot (just kidding… I hope!), think about how you can leverage PR, word of mouth, social media, and Etsy community resources like the Treasury, Teams, etc.
Funding Option 1: Making More Money
You have an operating business, so option 1 for getting more money should be increasing your revenues. Consider the following:
Reconsider your pricing: In addition to raising your prices, consider other elements of the pricing equation. Finding less expensive supply sources and finding ways to save time will help you create better profit margins.
Learn more: The Art of Pricing for Profit
Creative marketing: Hosting events such as trunk shows, teaching classes (I love Skillshare for this), sales, social media, cross-promotions with other artists, reaching out to bloggers, and finding ways to get more traffic from Etsy and various search engines are just a few of the many ways of getting out there.
Funding Option 2: Outside Sources of Funding
Your second option for capital is to look for outside sources. If you go this route, it’s important that you feel like you are offering a great opportunity to those who put money into your business, not asking for a handout. If you aren’t confident in your business, you can’t expect anyone else to be. If you are confident in your business, here are some great capital options to consider:
Friends and family fundraising: This is one of the most common ways that businesses get money when they are getting started (even big companies like Whole Foods). Financial gain is not the primary motivation for most friends and family lenders – they lend because they believe in you and your business. No one is saying this is easy – taking loans from people close to you is often uncomfortable and can stress relationships. You can prevent that by using clear, fair terms (you can make a simple contract), including people in your journey (sending frequent updates, free products, etc.), and taking smaller amounts from multiple people.
Ryan and Tilney of MAN vs. GEORGE raised money with their Kickstarter fundraiser. This is the print they gave to their supporters.
Crowdfunding: When you crowdfund, you use a site like Kickstarter to publicly tell your story and raise money from many people to reach your financial goal. Contributors get something from you (a thank you card, one of your products, an invitation to a special event, etc.) based on how much money they contributed. There’s a great fundraising story in this article from Man vs. George, an Etsy seller who wanted to raise $4,000 on Kickstarter to go to the National Stationery Trade Show. It can be a lot of work to successfully implement a campaign, but there are great marketing benefits in addition to the fundraising.
Small business loans from an MFI: When you think of getting capital, you probably think of bank loans first. Microfinance Institutions (MFIs) are a different type of lending institution offering smaller loans, looser lending criteria, and financial education. This is a good option to consider if you want to build your credit for future loans and growth. ACCION is a great MFI to consider – you can learn more here.
Loans based on sales: You might also consider taking out a loan that is repaid based on how much you sell. Kabbage is a lender that will lend to you instantly through an online application based on your current sales on Etsy — lean more here. If you are starting to get into wholesale, this could be an interesting option for getting the money to buy materials to produce the order before your invoice is paid.
Money doesn’t make your business. A successful business takes having great products that people love, creative marketing, thoughtful management and much more. To be sure, you can do it all with very little money, but you know that you have options. It’s up to you what goals you set and which path you choose to get there. Onward!
116 comments
Sign in to add your ownMadi from OnceUponAGem says:
Interesting.... thanks.
279 days ago
Victoria Baker from LittleWrenPottery says:
I do think it's important to grow at a sustainable rate, if you can afford to invest in good equipment that'll help you to craft better it's both an investment in the business and an in yourself.
279 days ago
iammie from iammie says:
Good tips! Thanks!
279 days ago
Liesl Carlson from lcarlsonjewelry says:
Thanks, I hope that this will alot of artists.
279 days ago
Penny Birch-Williams from PennyBirchWilliams says:
I appreciate the ideas in this article, but have to say I'm very unwilling to take on debt to fund growing my business. It's too much of a risk since we are already in debt from the economic downturn over the last five years, and now I'm tied to a day job for several years to come just to lift that burden. If not for that debt I could be a full time artist/seller now. So I'm very debt adverse. I can only hope that sales will fund any growth as I go along. And when the debt is gone, I plan to be ready to take my business full time.
279 days ago
Ami Raime from Raimestique says:
Thanks for the good tip!
279 days ago
Cody Nichols from CCNdesigns says:
What a timely article for me. Thanks!
279 days ago
Stephanie from StringBeardCraftery says:
Thank you so much for this much needed informative article. I'm always hungry for tools and tips that can help my business.
279 days ago
Roxana from IlluminatedPerfume says:
Perfect timing on this, thank you!!
279 days ago
MargaretKelly from MargaretKelly says:
Thanks for all the great resources! This article was very helpful :)
279 days ago
Jess from volkerwandering says:
This article was very informative! Thanks!
279 days ago
Debbie from thelittlemarket says:
Thank you for all this great info!
279 days ago
LivingVintage from LivingVintage says:
Great advice! Profit is not a dirty word. The point of business is to make money!
279 days ago
OuterKnits from OuterKnits says:
A valuable resource, especially for new Etsy sellers. They are other crowd sourcing micro financing options out there too.
279 days ago
Heather from iHartFelt says:
Fantastic advice ....thankyou!
279 days ago
Jennifer Jackson from PIXELGRINphotography says:
This is something I am considering for next year. Thanks so much for the tips!
279 days ago
jean from jmayoriginals says:
food for thought. thanks for posting!
279 days ago
Nataliya from HansHolzkopf says:
Thanks for the great tips!
279 days ago
Silvia Berrios from DesignsbySilvia says:
Great article!!! I will read it a few times, just to make sure I capture every tip for my business success.
279 days ago
TrulyAesthetic from TrulyAesthetic says:
Thanks for this article. Whole Foods is one of my favorite stores and their story is so inspiring!!
279 days ago
Laura from aromacandles says:
I absolutely needed this info desperately! Thanks so much.....
279 days ago
Lillian Bolster from LilBeeDesigns says:
Thanks for the well thought out post and laying out the different options.
279 days ago
Kimberly Morgan from AkimaBotanicals says:
Super, super helpful. I'm at the point where I may be considering financing options in order to grow further now.
279 days ago
Peshka from Peshka says:
Thanks, that is helpful
279 days ago
Elise from piecesofelises says:
Really good info! Kabbage sounds interesting. I will check that out!
279 days ago
Josie from JosiesBoutique says:
great advice!
279 days ago
IKA PARIS from ikabags says:
Question for us “I would like to sell enough to make $x this year.” Answer from me: If I want to sell enough to make $x this year or future , i need everytime best quality material , accesories, sewing machine etc , becasue if we want to sell more each day our handmade items must better than before , so I am sure buyers will happy to buy high quality products . This is my business and quality principles . When I started to sell my bags at etsy i think always same thing my budget was not enough , tahn in the time I add lots of quality , always much better fabrics,linings etc, much better accesories, much better gift packaging, much better sewing machines , strong threads , etc , because i am feeling more happy , every time I am thinking if i want to buy something which details are importante for me, cost, quality service, quality products, ooak products, who is really sewing or making own products, So work makes work , high quality work makes always much more quality work .
279 days ago
IKA PARIS from ikabags says:
Now I need bigger cutting and sewing place , and big space for my fabrics accesories etc , but this budget is really will big .I hope in the future why not , if we are working hard, believing and always dreaming, why not
279 days ago
Herb Girl from SpiritHorseHerbals says:
great tips.
279 days ago
Sarah Flood from SarahOfSweden says:
Helpful tips! Thank you so much!
279 days ago
crochetgal from crochetgal says:
Interesting article! However, I've found that its much better to start small and grow slowly in the first year so that you really understand the business. Only then can you really make the decisions to take out a loan or get outside financing.
279 days ago
Auralee from SecretAura says:
Thanks so much for the great info...i already use Kabbage......its a great resource.
279 days ago
Emily and Mike from SoapForYourSoul says:
Love this article! Although we started small, and have been steadily growing, it's just about time to think about upgrading equipment, and growing our inventory to accommodate our wholesale clients. Right on time, Dana! Thanks so much!
279 days ago
CB DESIGN'S from CBDesignsPR says:
Im going to use your advise!!! Thank you...
279 days ago
Leasa from LeasaDesigns says:
thanx for the tips! will keep this article to read and learn as I go....
279 days ago
Alison from AliCraftPatterns says:
Thank you, good advice.
279 days ago
Andrea NIchole Still from WhateverWorks says:
Very useful. Most of us crafty people have no clue about finances! I know I don't. Thanks!
279 days ago
Brenda Liz from brendalizboutique says:
Thanks for all the advices they were very helpful :-)
279 days ago
Paperlandmarks from Paperlandmarks says:
Good article! Start small, never borrow money. Speaking of tools, you can also use Cafepress.com or Zazzle.com for print-on-demand orders or try to get your ideas produced on Quirky.com.
279 days ago
Pim Carlton from pimssupplies says:
Great article, thanks, just what I need to read :-)
279 days ago
TKP from TheKnottedPalm says:
WOW! Never heard of Kabbage. Article was very informative and helpful. Thank You!
279 days ago
nicki from NickiNickiGallery says:
Resourceful and helpful article. Thank you!
279 days ago
Amy Nicole Davis from BowWowCouture says:
Really great article packed with awesome resources! Thank you very much!
279 days ago
Anna Otto from RuffleCouture says:
I hate to say that I think debt is never a good idea (or a "tool") and cannot see why new equipment cannot be purchased with cash that your business could take time to accumulate and earn. Debt is the reason so many small business fail-trying to be too big too fast. A great book on this is EntreLeadership by financial advisor Dave Ramsey
279 days ago
Martina from PotteryHeaven says:
Good tips, I especially like the point about pricing - reducing material costs, time spent. Knowing how much time you spend on each item and the profit margin are great motivators. I know it has been helpful for me in pricing special orders and to reduce the amount of wasted time spent in the studio which allows me more quality time with my family.
279 days ago
Garry Garrison from BohemianCowboy says:
lots of good ideas and tips , i wish i lived in a region that was more into art and hand crafted unique things
279 days ago
Rachel Biel from rayela says:
Thanks for the article! I can give testimony to the crowdfunding experience. I run an organization called TAFA: The Textile and Fiber Art List (www.tafalist.com). We started out on a blogger platform and grew quickly, realizing that we needed a state-of-the-art website with a powerful search engine. The budget was for around $5,000. We raised it on IndieGoGo in the summer of 2011 and launched the new site this past January. We have around 450 members from 35 countries and about half of them have Etsy shops. IndieGoGo takes a hefty commission but gives you the money you raise right away, so we were able to hand that over to the designer as the money came in. Almost all of it came from our members, which makes one think that perhaps we should have just done it internally, but it wouldn't have happened without the momentum we generated using our social media hubs. Facebook, especially, has been key to our growth. There are many crowdunders out there now, each with their own focus. Kickstarter is probably the most famous, but they don't fund websites and they don't give you the money unless you reach your goal. I think this crowdfunding trend is replacing traditional grant monies that came from foundations, especially in the art world. As the economy has had its downturn, the demand for those limited funds has made it very hard to get a grant. So, the crowdfunding option is a democratic alternative that can be successful if you can motivate your base enough to jump in and participate. My motto with TAFA's members has been "Together we can do great things!" And, it is true. We felt a need for a group that had a business focus within the textile/fiber art niche and we have been able to create that with very little money. All of the suggestions to look at local resources are very much on target in my book. I had not heard of Kabbage and just took a look. It sounds so easy and tempting, but like the others who have warned against incurring debt, I agree. Caution! Finally, I think that it's really important to try to use found or recycled materials in our products. Not only is good for the earth, but it really does cut down on the cost of production. It may make it harder to create a line of products that all look alike, but there are ways to achieve product consistency even with recycled materials. Thanks again for the tips!
279 days ago
Peggy McCallum from InMaterial says:
Super helpful article. Thanks.
279 days ago
Angie from RusticCountryVintage says:
Great info! Thank you for the resources:)
279 days ago
Susanne Østergaard from SussesSpindehjrne says:
Thank you, very useful
279 days ago
Jim McLean from BackyardBrand says:
Hey, Dana! Nice job! J
279 days ago
Carole Fox from foxpots says:
Sound advice.
279 days ago
Alison from HartleyRowe says:
Very helpful article! Thank you also to those of you that posted additional comments and words of wisdom. I love the Etsy community!
279 days ago
poseysandpetals from poseysandpetals says:
Very informative...Thanks so much!
279 days ago
Jennifer Beaudet from JBeaudetStudios says:
This could be very helpful! Thank you!
279 days ago
Lynne from RiverSpring says:
Wow, so much to think about! Thank you! from Lynne
279 days ago
Pamela Fisher from PaintBrushLady says:
Thank you for these great options. So glad to see choices other than bank loans. (I have enough business experience to be extremely wary of bank loans.)
279 days ago
simplycasualkids from SimplyCasualKids says:
Getting a loan to me is the what you want to do as a business starting out.. start out small and grow, as you make profit put back in your business..
279 days ago
Darbynwoods-David from Darbynwoods says:
just remember you could also.lower your price a.d. make more profit. you can sell more at the.lower price. to do.this.you have to understand your costs in both labor and materials
279 days ago
Connie from Divineangelshop says:
Great article!!!
278 days ago
Lucy from lucygalleria says:
Very helpful knowledge..great Etsy community...thanks
278 days ago
William Morris from williampaints says:
Installment and balloon types offered Competitive, fixed annual interest rates from 8.99% to 15.99% Closing costs of 3% to 5% of the loan amount (minimum of $100) and a $30 application fee will be financed into your loan from the link above in the article, THESE are NOT what I call competitive rates these are loan shark rates, PLUS there is an application FEE AND a 3% to 5% closing costs?
278 days ago
Lisa Hogan from LisasCraftiques says:
Great advice. I am going to sit down and create a plan for my business. Where I want to be in a year. This is something I have yet to do but really need to. I have been flying by the seat of my pants from the beginning.
278 days ago
Danielle Jones from HomeMadebyD says:
Excellent advice :)
278 days ago
Cheryl from AquariCreations says:
A lot of great tips here for novice and experienced business owners. Thanks!
278 days ago
Leaf Lee from LeafLee says:
Great advice!
278 days ago
Jason Chen from 7Daysinvitation says:
useful advice.thanks
278 days ago
Suzanne and Melissa from PookieandJack says:
Terrific advice! We know first hand about resources for businesses, my husband is an agent for SBA loans!
278 days ago
Cory B from TinyTipis says:
Perfect timing for this article! I've been mulling this over in my head for a while now and I think I may be ready to make the leap on some new equipment to expand my company. This gave me some good insight, thanks!!!
278 days ago
Gidget Smith says:
Thanks for all the good information! I did not realize that I had so many options! I am going to investigate and plan for larger growth.
278 days ago
Lindsey Barbie from WarriorsOfCulture says:
Great article! Thanks so much!
278 days ago
Slavka from PureNaturalis says:
Very good article. Thanx for all the ideas.
278 days ago
Katherine Hendricks from KAHdesignz says:
Recently I have figured out that making purses wasn't my forte and started making costume jewelry. I have found that I can spend less money on materials if I plan my pieces around what is on sale at various websites. It has really cut my cost down and helped with profit margin (well off my etsy page anyway). I have so far been able to finance my business with what ever is left over from my disposable income at the end of the month. Great article for this kind of website I am actually going through school and I am taking finance right now, we are currently discussing loan options and other types of funding.
278 days ago
Debra Smith from MyLiLBoutiqueEtc says:
Thanks for the great info.
278 days ago
Alexandra Beatty from beadinmama says:
Thank you for sharing this, great article!
278 days ago
Dorottya from SenoritaJoya says:
Hi Dana, Super article! Thanks! :)
278 days ago
Melani Anastasia from magsbeadscreation says:
Great article, thank you!
278 days ago
flamingfuchsia from flamingfuchsia says:
I am so glad this article was written. I have had to make so many decisions and have so many questions. I am a doubter...in the sense I often doubt my abilities. I have so many great ideas and now for the first time in my life I am not going to be scared to take a risk. I know that the economy has not been good and that is probably what has held me back, especially since I am still climbing out of debt due to recession (and almost debt free). I agree with PaperlandMarks and PennyBirchWilliams on not borrowing money to start out and I have not caved in. I have been making monthly budgets to buy affordable materials to build up my shop.
278 days ago
Reshma Sandell from Ahkriti says:
What a fantastic article. Made me go back on how I need to do business. So much to re think and ponder! I only wish that Kickstarter and Kabbage was available for Canadian citizens as well.
278 days ago
messinabella from BandBEstate says:
Good tips!
278 days ago
amber4you from amber4you says:
Good tips! It was interesting to read!
278 days ago
Linda from TheHickoryTree says:
Right now my business in in the black. But thanks for all of the information, great tips for all of us struggling artists!
278 days ago
Julie Soulen from JulieMagersSoulen says:
Great tips!
278 days ago
Diana Gamerman from Dianagamerman says:
I'm still struggling
278 days ago
Carol S Miller from CarolSMiller says:
Thank you! I will look into the non traditional avenues you suggested in the article. I have found that having a projection of sales as you mentioned helps, also comparing this year's business to last year's business, taking into account holiday shifts works as well. I'm at the point where I want to branch out to outside investors, but I want to keep control and that's where I have the internal "struggles". Suggestions welcome :)
278 days ago
MoniqueB from APassionForLace says:
I did make a goal but more like: how much can I make in one year. I hand knit shawls, and I can make only so much... The patterns of the designs are easier to multiply but not everyone is skilled enough to knit my shawls... I know I have to 'wait' for everyone to catch up and gét skilled enough, but so far not much luck. Investing wasn't the trouble, I sold a shawl and was able to afford new supplies. I'm not that skilled in advertising, so maybe it's a good thing to invest in that direction. Thank you for the insights. Monique
278 days ago
Renee Sutton from rengio says:
This was a wonderful article. Great tips!!! I will look into some of the financing you have talked about. This was extremely helpful. Your article was right on time with what I have been looking for. Thank you so much for your insight.
278 days ago
Merie Jessie from MerieJewel says:
Hey! this is a very impressive and inspiring article. Thanks for this!
278 days ago
Clover Lau from CungYung says:
Thanks for the tips
278 days ago
Abstract Studios from AbstractStudios says:
Very informative!! I will definitely be using some of these tips. Especially being more specific about how much $$ I intend to make.
278 days ago
Pine from TheRakishTilt says:
Useful info..thanks! I am opening my retail location this week on a shoe string budget, this gives me a little food for thought
278 days ago
Linda Hults from Lindyannanecklaces says:
Thanks Dana for the tip. Very interesting artical. I'm going to study it more so I can get the full understanding and then maybe ill try the loan. I just started my shop so I'm starting out small at first and ill see where it takes me. Thanks again!
277 days ago
Norma Taylor from RockinnQuiltin says:
Thanks for the tips
277 days ago
loveshappyhour from loveshappyhour says:
Thanks for the tips!! This is very helpful and encouraging!
277 days ago
Kelly from BaxCatandCo says:
Interesting points, thanks for posting this; I didn't know about some of those options before! "Money doesn't make your business" is a great thing to remember!
277 days ago
Clare Winslow from VisionsInPrint says:
Good tips, thanks!
277 days ago
Elizabeth M. Hollands from ElizabethMDJewelry says:
All very valid points! Thank you for the links as well.
276 days ago
Brenda Lee from SewingitAU says:
Thank you for great info!! :)
276 days ago
Beth Robinson from giftworldz says:
Wonderful article! Thanks for this.
276 days ago
Deva Mirel from freshpastrystand says:
I just had a successful Kickstarter project and highly recommend that route. Great article. Thanks!
276 days ago
Sheryl from HandPaintedPetals says:
A good starting point, but here are my thoughts: (1) a business plan is critical, but not difficult and too frequently not completed/updated, (2) taking on debt should be a last resort for a new business, must educate oneself to terms and all available alternatives, (3) be sure to include in your budget and sales forecasts how you'll repay the debt. (4) establish your own 'board of directors' -- 2-3 people whom you trust to give you honest feedback and direction
276 days ago
Bernie Meyers from ShilohArtStudio says:
Thanks for the advice! I find the comments helpful as well as the article. Does anyone know if there are crowdfunding options for Australians?
276 days ago
Stacy Novak from stacynovakart says:
Such great advice Thank you!
275 days ago
Scott from vinylclockwork says:
Great post great advice thank you
274 days ago
Janel Buckley from janbuckley says:
You have to have sales of at least $1,000 per month to qualify for Kabbage.
274 days ago
paisleyaura from paisleyaura says:
Yay! And thank you! This is exactly what has been on my mind lately-I'm kind of at a stand still because of finances right now. Much-needed info at just the right time! (Anyone want to contribute?hehe)....
274 days ago
Ganell from RainStudio says:
The wealth of this information and all the comments are invaluable. It helps me see more clearly what areas I need to focus more on. Thanks!
273 days ago
MoLu from WinterPearls says:
Great advice! Thank you!
273 days ago
Sue Bailey from glassscroll says:
This was informative indeed! I do strongly agree with Penny Birch-Williams though. I am in the same pickle as her. I do have a plan though over the next five years. Hopefully by then my debt will become more manageable allowing me to pursue my craft full time. Here's hoping! Thank you again for the valuable info!
273 days ago
atuforever wu says:
great idea, thanks!
271 days ago
Rondolyn Baker from RondolynsJewelry says:
Thanks for the time and efforts you've taken to school some of us that are seeking options to advance in our gifts & talents! I've been seriously considering a Sm. Bus loan, or grants & investors that could help move me forward. I'm a Sngl mother struggling to make it on the jewelry sales alone! I'm selling out of my van multitasking children in the back seats ( mini - marketers! ) I am thinking ....kiosks! Local Mall! I can do it I believe! Thanks! & blessings!
271 days ago
Joanna Goldman from CuteCartoonPortraits says:
There's also Grants (at least here in Canada). There's great YES workshops here in Montreal to help you with all that.
266 days ago
Tasha Robinson from ImperfectConcepts says:
Love this article. Great tips and one must really have a budget and stay focused on that. Also talking in forums helps. I have learned free press has generated more sales then when I have paid for advertising.
266 days ago
Elizabeth Knaus from FreshRetroGallery says:
It ALWAYS takes money to make money, especially if you consider that time is money.
245 days ago
robinspassion says:
A question===i make jewelry but have not sold any on etsy yet. I am also writing a book about speaking and writing simple English so students and adults will feel more comfortable speaking with others and in public. Can this book also be sold on etsy?
235 days ago
Lauren Yothers says:
Accion and Smallknot just launched a microfinancing + crowdfunding option. It's a great way to raise visibility for your business and get more money at the same time. A7 just finished their campaign and managed to raise more than their goal: http://smallknot.com/a7. You can read about the partnership here: http://smallknot.com/partnerships/accion-usa
225 days ago