Banks Don’t Want to Finance Made in the USA
OK – that may be a little harsh – it’s not that they don’t want to, but they really can’t. Let me explain.
When I first started Right Bank Babies I manufactured all my clothes locally. I truthfully had no idea how to produce overseas and as a new company it kept me hands on to be able to visit the factory regularly. I spent a lot of time sourcing each and every little bit and piece of the garments. We’d pay for all the supplies up front from multiple different sources and then pay for cutting and sewing at completion. I had a new business loan and all the production was financed through it. Labels, thread, buttons, snaps, fabric, interfacing, hangtags, boxes, plastic bags – all purchased from lots of different companies – you get the idea….
Eventually I was approached by international companies to produce at their factories overseas. They would come to my office, tell me they only needed one sample and a deposit and would be good to go. They would source everything from button and elastic to plastic bags and labels to hang tags – everything – it was a one stop shop – with one price that included the import duties and shipping. It SEEMED SO EASY. So I tried it with a few pieces that I had a very hard time finding production in the US like sweaters and the ruffled dresses. They arrived in house and looked great. The next season import duties went up (about 29% of the entire cost), prices went up and quality went down. Shipments were late due to random customs holds which customs would then bill us for. It became more of a hassle and we weren’t seeing the financial benefit. Mostly I learned that my initial instincts were right on – produce local and you can stay on top of the quality and reduce the lead time and avoid surprises.
We began to get large scale orders (4000-6000 piece orders) with lead times of 2-3months. With that turn-around time we needed to produce locally. We also needed PO financing. THIS WAS NOT GOING TO HAPPEN. This is where it gets hard to impossible for a small clothing company to expand and remain Made in the USA. A bank won’t finance local manufacturing because they can’t write a check to one company for the goods – there are too many factors. An overseas manufacturer gives them one price for everything – a confirmed invoice/contract and they know that they will have goods to show for it at the end. When you produce in the US you have multiple checks to write to multiple companies. There is no guarantee of an end product which leaves banks unwilling to finance.
But we still wanted the business and we still wanted to grow and we still wanted to be MADE IN THE USA. So we had to get creative.
We have begun offering our retail customers the option to pre-order goods on our Indiegogo Campaign or our website. This has allowed us to increase our production so that we have enough product at the end of the day for our retail customers not just our guaranteed wholesale pre-orders. Almost all of our large wholesale customers have been willing to give us deposits as well. They appreciate and realize the value of Made in the USA and understand that the terms of their purchase may need to change to accommodate it.
We love the customer support for the campaign we’ve been receiving and all the kind words – it means the world!
-Designer Ellen Uzarowicz