Ceramic Business Financing – Part 3: Where do I find the Money?

Marty Lewis, Business Loan Consultant, Sidney Credit Union, Sidney, New York

This article builds on Parts 1 and 2 in this miniseries on Financing a Ceramic Business.

In a market niche of small ceramic arts businesses, there are no easy answers to where to find money. It’s a very personal question and one with very personal answers.

For start-ups

Since the amount of money would not be very large – regardless if your business is a pottery, a Do Your Own Pottery studio, a porcelain or china painting studio or other ceramic business – the likelihood of finding third party financing, such as a bank is very small. I do not recommend that route anyway. My simple recommendation is to wait, if necessary, until you have a saved a stash somewhere and then streamline the structure of your business to fit that amount.

You are an entrepreneur and, almost by definition, entrepreneurs do not start with a big pile of money. They start with big ambitions, big ideas and big energy. Also big trust in good luck and big self-confidence. You should also know that you are a big part of the economic future of your country.

Do not borrow start-up money from your family – other than, maybe your parents or your spouse, if you wish your spouse to be your partner. Whatever you borrow or whoever you borrow from, draw up the ground rules for how to pay it back. When it comes to money, everything has to be in writing, complete with interest on the loan, re-payment terms and details as to how you will spend the amount borrowed. This pertains as much to family as to any outside source.

A partner?

Partnerships are fragile structures. As one of my professors told us in school – the most durable partnerships are the ones where the partners have a very clear and separate field of expertise – say one is an accountant and the other an artist. Or the ones geographically apart, where there are two locations of the business and each partner is responsible for his/her location.

My teacher said this tongue in cheek, but there is a lot of truth to it. When it comes to money, frictions easily arise and the more dependent the partners are on the expertise or location of the other, the more likely the partnership is to stay alive.

Again, it is a very personal situation and only you can find the right answer.

Preparing to start

We have several times underlined the importance of having a business plan. It’s very important, not to say absolutely indispensable. Your personal look into the future has to be on paper. And – in addition – reviewed by someone you trust. It could be your accountant or a trusted friend. But the key element is that that person will have an unbiased look at what you intend to do.

Not only does your advisor look at the figures – how much you plan to invest and how much you plan to bring in – he or she also has to believe that you are the person that can accomplish this. And have the courage to tell you what is seen as very achievable – by you.

I cannot stress this point enough. Your best friend might be an educated business person, but may shy away from telling you the truth and nothing but the truth. You are laying bare the expected future of your life and anything but the truth will not do. Starting a new business takes determination, courage and ability to risk not only your money but also other invisible factors such as you self-respect and exposure to critique by outsiders.

The next step

Let’s assume that you have done everything I have recommended here:

1. Calculated how much money you will need during the first year of operation – the most fragile period in your business. And furthermore, you have made a three year projection of where you intend to take your business. Check the chapter on the making of your business plan that I have earlier outlined in this book.

2. Consulted with the best person – or the best persons - you can think of, considering what’s said above, and gotten the honest nod from the advisor(s) that you can actually do this.

Now you are ready to go ahead with your venture. As a true entrepreneur, you will be dreaming of getting started as soon as possible and you plan to put blood, sweat, tear and your savings into the venture.

The next step is the most difficult one. DO NOT RUSH. Sleep on is, dream about it and be honest with yourself. And keep checking on the industry you are about to join. Find out where it is heading, where it has been and look for any telltale signs about its future. The direction of the industry – that niche of the ceramic business you plan to join – is crucial to you. If you perceive it to be negative, then rethink what you have planned to do and go back over your plans, go back to your advisors and try to have a completely open mind about whether or not you should go into the venture with the headwinds against you. Contact friends and friends of friends that are already in the industry and try to get their honest opinion about the future.

After all, you are talking about your future.

What if you have been wrong?

If so, just face it and change direction. Your instincts as an entrepreneur remain the same. They will still be there. It’s your plan that needs to be adjusted or even abandoned in favor of another one. I am talking to you from decades of experience in different industries so take my advice very seriously.

All indicators are positive

Bingo! You are convinced that you have hit your personal jack pot. Congratulations! Now the next step - finding the money.

As said, it’s tough and requires patience, as you in all likelihood will have to scrape together the needed money to get started – something that takes time. Along the way of gathering your nest egg, it is a good idea to explore outside money, such as a bank loan. Why? Because it will be an excellent guide and lesson to both how you have to think and what you have to do.

Approaching a bank

Many banks will probably not even listen to you. Your business is too small and too risky and – your ceramic arts’ business niche, face it – is probably unknown to a banker. Anyhow, it is a good education. The forms you would have to fill out will teach you a lot. And, whatever you learn from outsiders at this stage is free. So by all means, draw a deep breath and approach a community bank with your plan. The process – should the bank consider it and ask for details – will be sobering. Maybe this is your first venture into your own business. Maybe this is your first exposure to the cold outside world of finance. Shrug off your timidity, go ahead and contact them. What you will get is, as said, a free lesson in what a banker is looking for. And that is also, what you should be looking for.

What kind of bank or financial institution?

If the community bank turns you down, and even if they do not, try a Credit Union. You are more likely to get a friendlier reception form this kind of financial institution. What is a Credit Union? It is a not-for-profit, local financial institution, working and offering the same services as a bank. The big difference is that the owners are its customers/members - in your community. Finding one is not difficult and their approach to lending will be different from the community or other type of bank.

Just to check out their reaction to your situation, I interviewed a credit union in my area. I think I am right in saying that the very nice reception I got bears my thinking out. Yes, they would have you fill out forms and answer the same questions as a typical, for-profit bank. However, their positive approach to small businesses is more likely to fit your profile as an entrepreneur.

And they may suggest one thing that you should listen to. If you set up a checking account with them you are likely to be approved for a line of credit that you can draw against if a dire situation crops up. Once approved, no further questions asked. The size would be negotiable. A line of credit is simply an amount of credit available to you right away. Your proforma financial statements at the time of showing them your business plan, would have to be acceptable. There might be a small fee when you set it up and the Credit Union might not keep it open more than for a year at a time (renewable). Once you draw against it, you will have to pay a negotiated interest rate. And – once a year, you have to “be out of the line”, meaning having it paid down to zero, for one month’s period every year.

I recommend you establish a line of credit for an emergency. It will give you some sense of security and, in addition, establish you as a viable business in the eyes of the credit union. It costs you nothing to have one, as long as you have no balance on it.


To finance your ceramic studio business at the start-up stage you will basically have to rely on your own savings, plus whatever money you may have available under the restrictions and recommendations outlined above.

Once your business has “matured” and you have established a stable cash flow and has a good credit history, you might consider a bank loan. I repeat though – if you can stay away from borrowing, do so.

To restate:

1. At the start-up, use your own savings.
2. Establish a line of credit with a credit union, but do not use it unless there is an emergency.
3. Make the profits generated by your business finance your growing need of funds.
4. Make as much use as possible of suppliers’ credit terms, if you can get them.
5. Expect your business to take 3-5 years before it is considered established
6. At that juncture, you may revisit your short and long-term financial needs, including a bank loan. At that time, you should also re-visit your business plan.

When you have your own business, time runs faster than ever before. Three – five years might seem like a very long time. But in the world of business, which you now belong to, that time line is short.

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© 2011 by Rolf E. Ericson, Oneonta, New York, publisher. All rights reserved. Photocopying, reproduction , copying, or redistribution of any kind in printed or electronic form is strictly prohibited without written permission from the publisher.