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Mail Order 500

[ 1 ] May. 26, 2011 | SBO Editor

Thanks to the Internet, mail order is an old moneymaker that has become invigorated, renewed and accessible to anyone with access to a computer. This is a great time to start a mail-order business and incorporate a website to capitalize on Internet sales. Consumers are looking for ways to manage their time and ordering via a website is fast and convenient. Even if you start your “mail order” business and run it strictly online, the industry still considers it a “mail order” business. If you’re interested in starting a mail-order business, you aren’t alone. Mail order is hugely popular—in 2010 a staggering $300 trillion worth of goods were sold by mail order. How do you find a winning product to sell and connect with buyers? If you know the tools that are available, you will work better, smarter and faster to create a dynamic mail-order business right from your kitchen table.

In the “old days”—meaning up until the mid-1990s before the Internet really took off—entrepreneurs found a product such as a cooking gadget, an article of clothing, a self-published book or a craft item they created themselves. They stocked the item in their garage, attic, basement or bedroom—placed advertisements and waited for the check or money order to be delivered. They then sent the item out or had it drop shipped from another location.

Today’s mail-order entrepreneur still places ads in appropriate publications but increasingly those ads are online. They might be on Facebook or through Google’s AdSense program.

So how do you find a great product to sell? The Internet has made shopping for goods and products an international experience.

Alibaba.com Limited is the global leader in business-to-business e-commerce and the flagship company of Alibaba Group. Alibaba.com makes it easy for millions of buyers and suppliers around the world to do business online through three marketplaces:

A global trade marketplace (www.alibaba.com) for importers and exporters, a Chinese marketplace (www.alibaba.com.ch) for domestic trade in China and, through as associated company, a Japanese marketplace (www.alibaba.co.jp) facilitating trade to and from Japan. Together its marketplaces form a community of more than 42 million registered users from more than 240 countries and regions.

Jack Ma, a former English teacher from Hangzhou, started Alibaba.com with 17 other founders as a trading platform for small and medium manufacturers to sell their wares.

In The Official Alibaba.com Success Guide: Insider Tips and Strategies for Sourcing Products from the World’s Largest B2B Marketplace (Wiley), authors Brad and Debra Schepp level the playing field for small business as they show the various sourcing opportunities offered by the world’s largest B2B ecommerce marketplace.

Founded in 1999, Alibaba.com makes it easy for millions of buyers and suppliers around the world to find exactly what they need to make their business a success. “Once viewed as the province of only the biggest and most experienced corporations, looking across the globe for your next product idea is now possible, no matter how small your business may be or how inexperienced you may feel as you embark on this journey,” say the Schepps. Using Alibaba.com, entrepreneurs can find an inexpensive product to sell, make the purchase and resell it at a high profit. The duo also advocates that entrepreneurs consider other online businesses such as selling through eBay and Amazon.com.

In their Alibaba.com book they offer tips for your launch:

• A step-by-step guide on how to offer and discover international sourcing opportunities.

• How to chart the course in finding the right trading business partners and doing it safely.

• The crucial components to successful importing.

• The key aspects of working with suppliers to develop long-term relationships.

• How other successful entrepreneurs used global sourcing to build their business.

• The best way to make Alibaba.com’s five-million-plus storefronts, offering manufactured products in 42 different categories, work for any business.

• Tactics to closing a deal and completing an overseas transaction.

With the Internet presenting so much possibility for small businesses today, it is important to understand this door of international opportunity that is the overseas marketplace.

Here is the checklist for getting started in international commerce:

• Select the right trading partners.

• Take time, move slowly and ask plenty of questions.

• Account for special concerns you might encounter including language and cultural differences as you cross international borders.

• Create criteria checklists for your partners and your products.

• Get your tax ID and other business credentials in order.

• Research market trends and products on Alibaba.com and the Internet.

• Your new trading partner should be experienced in exporting and therefore well able to help you manage the details.

• The International Chamber of Commerce has established Incoterms to define the steps that take place when goods are transferred from the exporting party to the importing party. Be sure you understand the terms as they apply to your shipment. Visit www.iccwbo.org/ to learn more.

• Be certain that the products you want to import comply with all the U.S. standards and regulations.

• The U.S. Department of Commerce and the U.S. Customs and Border Protection are federal agencies that stand ready to assist you.

• Before asking for pricing information, ask about minimum order requirements and whether the company you are considering has delivered goods to your part of the world.

• Consider traveling to meet your partners face to face.

• Recognize that it will take time and effort to build a solid partnership, but that solid partnerships are highly possible.

• Clear and detailed photos can help both you and your supplier get the details of your products correct.

• Ask for samples of raw materials and/or finished products, as appropriate.

• Ask for an inspection sample when about 20% of your order is complete.

• Do not hesitate to clearly communicate your concerns or problems to your supplier. Do it in writing.

• Do not hesitate to negotiate the prices you pay for your goods, recognizing that your prospective partners probably do not expect you to accept the first price they cite.

• The Safety & Security Center can help ensure your transactions proceed safely and without problems.

• Alibaba.com’s Trade Dispute Proced-ures can help you work through disagreements with partners, should they occur.

• Learn more from trade associations such as Internet Merchants Association (IMA) and the e-Commerce Merchants Trade Association (eCTMA).

• Be prepared to change your business plan as your expertise grows and your partnerships broaden.

Alibaba.com Successes

Sisters that turned their hobby into a million dollar business: While shopping for scrapbooking supplies in 2003, Caroline and Deborah Lau became frustrated with the lack of unique items available. They created Maya Road to try to fill that void, and used Alibaba.com to help them jumpstart their business. Caroline says, “We taught ourselves international trade with Alibaba.com’s help and it was easier than we could have imagined. Today, Maya Road merchandise is carried by 1500 stores worldwide.

A small company selling flags out of a basement now has 100 employees: Kevin Hickey says, “Alibaba.com has helped us grow by enabling us to purchase high-quality, low-cost products from abroad with little or no research costs.” Today, Online Stores is expanding at an incredible rate with more than 100 employees. The company says, “What recession? Our sales are up 20% and we are making more money than ever.”

A ball and a dream lands in the hands of thousands: About five years ago, Mary Pembleton, a speech therapist in New Jersey, decided to integrate a ball into her sessions with kids that became an instant hit. She knew she would have to create the ball herself because it didn’t exist. Using overseas suppliers found on Alibaba.com, Mary and her husband Gregg created Thumball, hand-sized balls inscribed with messages. They created a prototype overseas and found suppliers to manufacture the product.

Going Online With Your Biz

The traditional outreach method for mail-order enterprises has been advertising in magazines and newspapers. And that’s still a method used by many.

But the Internet has opened up a whole new world of marketing possibilities for mail-order entrepreneurs. With web sales predicted to reach an astonishing $990 billion annually by 2011, it only makes sense for mail-order business owners to get in on the action. Some of the possibilities for online sales and marketing for your mail-order businesses include the following:

Using e-mail. Providing an e-mail option as one way to communicate with your customers is merely good business sense. Include your e-mail address on all correspondence, business cards and other company documentation. You can ask current customers for their e-mail addresses or you can rent an e-mail list online. Type in “e-mail lists” for your web search to find sites which sell lists.

Setting up a website for your mail-order business: This is an obvious approach and can be used in at least two ways.

One is to have an information-only site. If you choose this route, you can include your website address—or URL (Uniform Resource Locator)—with your promotional material. It should also be on your letterhead, business cards, on press releases—in every kind of document your business produces. Referring potential customers to your informational website is a quick and efficient method of delivering company information to customers, the press and the general public.

Pack your website with clear, interesting and accessible information about your products/services along with a Frequently Asked Questions (FAQs) section. New products, sales information, seasonal products, etc., also can be quickly publicized with a website.

With information on how to contact your business—by phone, fax, e-mail, or snail mail—your site will also function as a shopping venue. Creating a guest book and asking website visitors to sign in before gaining complete access to your site is an easy way to build a quality e-mail list.

The second website option is to take your website a step further. With a full-blown e-commerce site—offering shopping cart technology and encrypted credit card processing—you’ll have a virtual online store. But this type of site really only makes sense if you have a number of products to sell or you’re planning a catalog of goods. Start out with a more modest site to see which makes more sense for your business.

Signing up for an online mall. Another approach to the online sales equation is to sign up as a tenant in an online mall. Online malls are the virtual counterparts to “bricks and mortar” malls, typically offering a number of “departments” to choose from, advertising and promotional services, and even shopping cart technology and order processing.

There are hundreds of online malls on the Web—from giants like www.netmall.com with more than a quarter million tenants to small, regional specialty malls—and they offer a vast range of options for small businesses. Prices can be as low as $19.95 yearly for a simple listing and can run as high as several hundred dollars monthly with all the bells and whistles.

Thoroughly research what these marketing vehicles offer before signing up. Ask for a free trial period—or at least ensure that you can terminate your arrangement if results are not forthcoming.

For those of you who are more comfortable going the traditional mail-order route by selling your products via catalog, we asked marketing guru Jim Tilberry to offer some tips on how catalogs can help set your mail-order empire soaring into the transgalactic trillion-dollar universe.

Selling your product in a catalog is not as dynamic as a TV commercial nor as impressive as landing on the shelves of a nationally known store. But there are several advantages to a small company with no name recognition and limited resources.

1. You make your product known. Until potential customers become aware of your product they’re not going to buy it. Catalogs serve an important role in getting the word out.

2. You can compete more easily. Catalogs offer a level playing field for the big corporation and smallest startup. With few exceptions, products are judged and sell on their merits, not on the reputation of the manufacturer.

3. You don’t need a “line” of products. Catalog buying committees evaluate one product at a time. So the one-product company is not at a disadvantage as it is when trying to get shelf space in a large store.

4. You can save money on packaging. Unlike point-of-purchase sales where the package helps sell the product on the store shelf, the package has no bearing on the sales of an item in a catalog. So you don’t need an expensive four-color box. In fact, the simpler the packaging, the better. A sealed plastic bag is often sufficient.

5. You keep your risk low. Most catalogs still charge nothing to advertise your product. Any fees are nominal and usually negotiable.

6. You grow at a manageable pace. Catalogs place relatively small orders when your product is first tested, so you’re not immediately overwhelmed with orders you can’t fill. Since orders increase gradually over weeks and months, you can prepare for the growing demand.

7. You can test different markets. When you place your product in specific niche catalogs, you can test different segments of the marketplace to determine who your best customers are. This information can be useful in fine-tuning your overall marketing strategy.

8. You gain credibility. Having your product appear in a well-recognized catalog can help you get sales in other areas such as TV home shopping.

9. You get national exposure. Catalogs offer startups and small companies exposure to millions of potential customers around the country.

10. You can make a lot of money. Catalogs sales are over $100 billion annually. Just a tiny piece of this market can still amount to big revenues. With more cash in the coffer, other marketing programs become easier to execute.

For all of these reasons, catalogs are a logical first step on the road to a broader marketing campaign. The benefits are especially important to the struggling startup that needs to watch every dollar spent. Few other marketing options are as easily available and affordable.

Once a product has sold well in a number of catalogs, you’ll start getting some cash flow and can increase production. You can then hire reps, exhibit at trade shows, and strive to get your product into stores. From humble beginnings catalogs can propel your company toward success.

Jim Tilberry is the owner of Tilberry Direct Marketing, a rep firm that helps inventors and small companies place their products into consumer catalogs. For more info, contact Tilberry Direct Marketing, 1584 Buttitta Drive, Suite 310, Streamwood, IL 60107
Phone: 630-837-1915 Fax: 630-8379715 E-mail: jtilberry@aol.com Web site: www.catalogrep.com.

A simplistic, “get rich quick” approach to your mail order venture will likely leave you disappointed. You’ll need to do your research and invest some elbow grease to claim your piece of the mail-order pie. The following steps will help you plan your mail-order enterprise start-up.

1. Picking a Product or Service to Sell and Market In Your Biz. Isn’t this the first step in starting any business? The types of items and services sold by mail order run the gamut—from handcrafted items to advice-giving newsletters to antiques. But how do you pick something that stands a chance of success?

Most experts agree that the items you offer for sale must be unique—and unavailable elsewhere. Why? If your product is one of a kind, it has appeal for buyers. And if you can purchase the product at the local supermarket, then why order it through the mail?

When you have a few items in mind, you’ll need to evaluate them. Here are a few questions to ask of each product or service to determine which one or ones you’ll sell.

• Does the product offer benefit to
the buyer?

• Is there a large enough market of
potential buyers for the product?

• Are you knowledgeable about the
product or can you become

• Are there any similar products
already on the market?

• Can the item by competitively priced,
yet bring enough profit to justify its sale?

• Can the product by easily shipped?

• Do you have a source for the

2. Locating Suppliers. This final question in your product query is pivotal. Where will you obtain your product? You may already have determined that you’ll manufacture the product yourself. This might include items like crafts, “how to” booklets, or your very own invention. If you intend to produce the product yourself, you’ll need to address a number of issues—such as where will you secure your supplies at wholesale prices, if possible? Are there any laws which apply to the manufacture of your product—for example, zoning restrictions if you’re working at home, health laws, etc.?

If you’ve determined that you’ll purchase your product and re-sell it by mail, then you’ll have to locate sources. Keep your eyes open for the products you’re interested in. Look at catalogs and at retail stores. Attend trade shows and read trade magazines. Then contact directly the manufacturers of the products you’re interested. You’ll find the contact information in Thomas’s Register of American Manufacturers (www.thomasregister.com) or the Catalog of Catalogs at your public library.

Two additional resources are The Wholesale by Mail Catalog (St. Martin’s Press) and the company, Specialty Merchandise Corporation (www.smchomebiz.com), which offers wholesale mail-order goods.

3. Pricing Your Product. To determine your selling price, you’ll first need to calculate the actual cost to you of buying (or producing) the product. Your actual cost will include all raw material, start-up expenses, shipping, packaging, labor, overhead and advertising.

Now you’ll need to determine what your profit should or could be and what your target market is willing to pay. Many companies in the mail-order industry use a markup of 200% to 300% of the actual cost of the product. But you won’t want to charge more than your target market is willing to pay.

As part of your product pricing exercise you’ll want to secure a resale tax certificate from your state, if your state exacts a sales tax. This certificate will allow you to purchase goods without paying sales tax. You, in turn as the retailer, will collect the sales tax from your buyers.

4. Your Marketing Plan. This is one of your biggest start-up steps as a mail-order entrepreneur—and the element which truly sets mail order apart from other types of business operations. Your marketing plan will determine how you connect your customers to your product.

The first query of your marketing plan is: Who are your potential customers—your “target market?” Are they business people? Teens? Stay-at-home parents? What are their needs? Why would they want to purchase your product or service?

The next section of your marketing plan will describe how you intend to reach that target audience. With mail-order businesses the methods of marketing have blossomed in the past decade. Years ago, the traditional approaches for mail order were classified advertising usually located at the back of magazines or newspapers—display ads, and direct mail solicitation. Radio and TV ads were also possibilities.

These are methods which are still used and which you very well may want to include in your marketing plan. For any of these methods, your ads need to be well written and placement—the venues you use to advertise—should be well chosen to reach your target audience.

Once you’ve determined the magazines, newspapers and other media outlets through which you plan to place ads, you should contact their advertising departments and ask for a “media kit.” Your next task will be to write “copy”—the ads themselves—which sells. Draft some ads listing the persuasive selling points of your products—perhaps with introductory or “limited time” offers—and then test them on family and friends. Try them out in a selected publication and then see what kind of results they bring. You may need to change your copy, your publication—or both—for success.

If you decide to use direct mail solicitation, you’ll need to develop a package of information to send to your potential customers. Mailing lists can be rented from Customized Mailing Lists, 1906 Field Road, Sarasota, FL 34231; 800/237-LIST and American Consumer Lists, P.O. Box 27347, Omaha, NE 68127, among other companies.

You’ll probably also want to consider the “new” approaches to mail-order marketing, most noticeably the Internet. We’ll get to this resource in just a few paragraphs.

Another marketing boost which has skyrocketed in popularity is to secure a toll-free phone number. Studies have shown that prospects are seven times more likely to call a toll-free number than one they’ll be charged for. There are numerous toll-free services available. Shop around, compare rates, and read the fine print.

5. Basic Business “Stuff.” The following “business start-up” issues, among others, must be addressed as you put together your mail-order enterprise:

Your business name. An important first step for any business, the task of creating your business’ moniker involves telling the public what you do in an unforgettable way but in as few words as possible.

Zoning/legal issues. Check with your local government on the need for a business license. If you intend to sell food products, you may need health department approval. And, if you’re operating out of your home, ensure that zoning laws allow your type of business in your area.

Credit Card Merchant Account. The ability to accept charge cards for payment is crucial to your business. Start with your local banks—if your personal credit is good, you may be able to acquire a merchant account through them. If not, try an ISO (Independent Sales Organization—essentially, a
go-between that exacts a fee from you for their services) or ECHO (Electronic Clearing House, Inc.—28001 Dorothy Drive, Agoura Hills, CA 91301). Several Internet-based companies—like www.charge.com—can also offer assistance. The major credit card companies are other possibilities. Remember to shop around for your merchant account. Compare prices, and always read the fine print.

Business Plan. You’ve heard it a thousand times and, yes, you do need a business plan, even if it’s a very informal one for your eyes only. (Although if you’re attempting to secure a merchant account or start-up financing, you may need to make it a formal document to be shared with bank officials.)

Over and over, studies prove that businesses that fail to plan are, essentially, planning to fail. Putting together a business plan is crucial to your business’ survival. Your plan should include at a minimum: an Objectives and Business Description detailing your business concept and goals; a Product/Services Description—the items you’re offering, why they’re marketable, etc.; Operational Details—who your suppliers are or how you’ll produce items if you intend to manufacture them; your Financial Plan—including estimated start-up costs, pricing information, sales estimates, etc.; and your Marketing Plan. (See next section.) A brief one- or two-page summary of the plan’s elements should be included after the cover page and before the formal plan.

6. Filling Orders. Once you’ve contacted customers and secured orders, you’ll need to keep your end of the bargain. Fulfillment is the process of securing and shipping goods to the customer who’s ordered them. If you produce your own inventory or you’ve purchased goods for resale, then you’ll be responsible for packaging and shipping.

A “drop ship” arrangement is also possible, where you arrange with the manufacturer to ship directly to the customer.

7. Taking Care of Business.

With fulfillment of your mail-order businesses purchases, the marketing loop is complete, right?

Yes and no. Your successful business will include the ongoing issue of customer care and service. Satisfied customers will keep buying—and they’ll tell others about the experience.

Other elements of your business are also ongoing. Changing your mix of marketing methods is important as you determine which approaches work best for which products. Adding and/or eliminating products may also be good for your business. Tracking results of various advertising efforts is pivotal.

If your approach to your start-up steps—and your follow-up tasks—is professional and earnest, the sky is the limit for your mail-order operation. Jim Tilberry also offers strategies to help you determine “Is My Product Appropriate For Mail-Order Catalog Sales?”

Here are 14 criteria to judge whether your product has potential to be a catalog winner. Although it’s not necessary to meet all of these criteria, the more it meets, the greater the likelihood it will be successful in mail order.

1. It makes sense. Upon seeing your product for the first time, most people would understand the value or usefulness of it.

2. It’s new. Ideally, the product should be fairly new with limited or no exposure at trade shows or in stores.

3. It solves a problem. Your product solves a common everyday problem that’s never been addressed before, or it solves a problem in a unique way or a much less expensive way.

4. It’s unique. There’s absolutely nothing like it on the market.

5. It looks good. Your product photographs well. An attractive eye-catching photo works wonders for sales.

6. It’s simple. Your product has just one main function and solves just one problem. It takes less copy to explain a simple gadget than one with lots of “bells and whistles.”

7. There’s a widespread market. Naturally, the larger the catalog market for your product, the larger the opportunity. Unfortunately, certain consumer markets, although big, are not necessarily big catalog markets.

8. There’s a year-round market. The bigger the window of opportunity for your item, the better. It’s usually more profitable to get steady sales throughout the year than to be limited to a short seasonal market.

9. It’s safe. Ideally your product should not be dangerous in any way. There’s no risk, or at least limited risk of injury to the customer. There are no small breakable parts for children to swallow.

10. It’s durable. Your product will easily ship without breaking.

11. It’s easy to supply. There’s an adequate inventory with a short lead time (less than four weeks) on production. Plus, you have backup suppliers lined up, in case you need them.

12. It’s priced between $5 and $100. Ideally, the perceived value is over $5, unless the product can be sold in sets. Although there is no upper-limit price, generally products selling for over $100 have slower sales through catalogs.

13. It’s easy to mail. Your product is UPS-shippable. If it’s particularly long or odd-shaped, you can provide the product in a re-shipper box. Preferably the product should also be lightweight. Naturally, the higher the price/weight ratio, the better.

14. It’s patented. Although it’s not absolutely necessary that your product be patented, with a patent you can ward off “knockoffs.” The catalogs will also feel better about advertising your product if they know you are the rightful owner of the idea.


Fred Broitman a  well known mail Order authority and principal at SUNMAN DIRECT, Chicago’s largest independently owned Direct Response Advertising Agency has completely revised and up-dated his book HOW TO BECOME A MAIL ORDER MILLIONAIRE. This comprehensive manual to help you start, run and manage your own mail order business includes all new sections on how to supercharge your mail order business using the internet.

Topics include everything from how to find a great product to sell and how to create winning ads, to establishing your online presence and maximizing search engine optimization that will drive customers to your website. It is available through mail order and at select conventions. This book sells everywhere for $39.95 but the first 100 orders received from readers of this magazine can save $10 and buy it for only $29.95 plus $3.50 for first class postage and handling. Send a check or money order in  the amount of $33.45 to: SUPERIOR PRESS 333 N. Michigan Ave. Suite 1032, Chicago, IL 60601

The Five Biggest Traps To Avoid When Leading A Diverse Team

By Joanne G. Sujansky, Ph.D., CSP

Today’s leader must motivate and retain talent, that talent being perhaps the most diverse than it’s ever been. The differences are of many kinds, including, but not limited to: race, ethnicity, gender, age, sexual preference, lifestyle, physical and mental challenges, geographic origin, education, personality, values, experience, and socio-ecomic status.

There are five common traps that leaders fall into when leading diverse teams, as shown below. Also included are some suggestions for avoiding these mistakes:

1. Not Valuing Differences. When leaders see differences as an advantage, they seek diversity in their teams and work hard to get different perspectives and opinions on the table. They naturally encourage individuality while promoting teamwork.

2. Failure to create an inclusive environment. Leaders need to encourage the involvement of all team members who, in turn, need to feel comfortable about offering suggestions and challenging ideas or practices. Leaders demonstrate inclusion by being open to new ideas, listening to different perspectives and encouraging creative problem solving. An inclusive leader will challenge the group with comments like, “What other ways can we spin this idea?” “Who can suggest something totally radical to what we’ve done in the past?” A leader may also encourage participation by asking individuals to list ideas on cards to be submitted to a master brainstorm list.

3. Stereotyping. Leaders must avoid associating any behaviors, talents, or lack of ability with any particular group. For instance, any leader who assumes that all women are emotional or that all Asians are excellent in math is guilty of prejudice and, further, does not acknowledge the uniqueness of each individual.

4. Not modeling the expected behaviors. Effective leaders demonstrate the behaviors they want from others. When they show respect for differences, develop trust in their teams and promote the valuing of differences, they set the standard for how others should behave. They should clearly communicate that disrespect for others will not be tolerated. If they observe inappropriate actions or hear disparaging comments, leaders need to be quick to confront the behavior and to suggest or encourage more appropriate ways to handle the situations.

5. Failure to coach. Leaders need to make expectations clear to all employees and coach them individually toward higher levels of performance and growth. Besides the individual coaching, leaders will need to help diverse teams with conflicts that may arise from their differences. The leader must also encourage team members to coach others. As coaching becomes part of the environment, new members to the team have access to and can build mentor relationships with others who can be helpful resources in the organization.

Talented individuals bring different perspectives and ideas to the workplace. It’s a leader’s job to attract and retain them. Avoiding these five traps can move diverse teams to their highest level of performance.

ABOUT THE AUTHOR Joanne G. Sujansky, Ph.D., CSP (Certified Speaking Professional) is the founder of KEYGroup(r) an international assessment and training firm. Joanne is a frequently featured speaker and has authored numerous books on leadership, change and retention. Reach her at: 724-942-7900 or at: www.joannesujansky.com.



The U.S. Small Business Admin-istration is a valuable resource for you when starting a business. The group is the main advocate of small business in our federal government. While the group is generally known for its small business loan guarantee program, the SBA can also help you get information, advice and in general, establish and run your own venture.

The phone number is 800-827-5722, and the address is 409 Third Street, SW, Washington, DC 20416. Their website is http://www.sba.gov

About the loan guarantee program: The SBA provides access to financing for small businesses that could not obtain financing on reasonable terms from normal lending channels. Banks are often unwilling to loan start-up ventures any money because they don’t have enough collateral and they usually take much longer to pay back a loan. Some banks, however, don’t want to reject your business. They still view many start-up ventures as risky and will ask the SBA to guarantee up to 80% of the loan amount. This reduces the risk of nonpayment.

The SBA does not make the loan but guarantees the bank who loans you the money. In this way, many businesses are able to borrow funds that would not otherwise be available.

You can use the loan money for the following activities:

• purchase raw materials or inventory

• purchase furniture or fixtures

• purchase machinery or equipment

• purchase land for construction

• building and construction costs

• leasehold improvements

• purchase of real property

• working capital needs

• refinance of certain types of debt

Monies obtained from an SBA-guaranteed loan may not be used for the following activites:

• gambling and illegal activities

• speculative businesses, including oil, dealing in commodities, and real estate

• most nonprofit organizations, including consumer cooperatives

• lending or investment concerns such as life insurance, investment companies, banks, finance companies and other businesses whose stock in trade is money

• pyramid or multi-level sales plans

• applicants currently serving time in jail or those who are on probation or parole or who have criminal cases pending may not be considered for an SBA-guaranteed loan

• construction of certain combo residential and commercial space buildings.

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Category: Magazine, Small Business Opportunities, Small Business Opportunities Sept 2011

  • http://www.magicjoker.com Ron

    Great article. I used some of the tips for my magic trick site.