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I need to get about $500,000 for my business to manufacture my product - I dont have that much money. How would I go about raising it?
You have a few options. While $500,000 seems like a lot of money, it's really not (in the business world)
First you need to figure out exactly what you need the money for. Is it to build your prototype? Is it to hire someone? Is it to buy inventory? etc... Knowing this will put you in the right direction. Should you raise Angel Capital? Should you go to an early-stage Venture Fund? Should you go to a Bank and borrow it? Or, if it's for manufacturing your inventory, should you consider Purchase Order Financing.
Purchase Order Financing is an option most people dont think about. Basically, if you have a product that a large company (or companies) want to stock in their store but you don't have enough money to buy the inventory to send to them, you may be able to get a PO Finance company to buy this inventory for you by showing them a purchase order.
So lets say Home Depot wants 10,000 of your new multi-screwdriver for their various stores. They give you a purchase order. You then give this purchase order to a PO Finance company. They give you the money to manufacture the screwdrivers. Home depot gets the screwdrivers and pays the PO Finance company, and they pay you minus their cut. Their cut is usually around 4-5% per month that you are borrowing the money. So if you need $100,000 to manufacture your screwdrivers for Home Depot, and it takes exactly one month to make and deliver them, you pay $5,000 to the PO Finance company.
Hopefully your margins are higher than that! So if Home Depot buys them for $150,000. You make $45,000. Now, of course, if Home depot has a 60 day turn around for their invoices you'll want them Factored so you don't pay an additional 10% to the PO finance company....
Not all PO finance companies are the same (or good/fair), if you would like an intro to a great PO finance company, let me know - Click here: Purchase Order Finance Request
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