How to Finance Upfront Production Costs

It’s Small Business Week at Maker’s Row! So here are some tips on financing production for Small Businesses!

Who is Bond Street? Bond Street provides fast, affordable financing to grow your business. We offer term loans of up to $1 million, with interest rates starting at 6% and terms from one to three years. If you’re interested in capital for growing your business—or just want to say hi—drop us a line. We’d love to learn about your goals and tell you a little more about us, as well.

Running a product business comes with cash flow challenges. For those just starting out and as well as those who’ve been at it for 20 years, finding the right capital from the right source to cover production costs is a daunting task. Here’s a simple guide to help you understand your options and make the right choice for your business.

Before Looking at Financing Options

You can finance production costs in a myriad of ways. Some take months to come through and others are available in days. You’ll want to know which to choose long before the day of need arrives!

Before you start contacting manufacturers and lenders, create your production timeline and budget. If you have a plan in place from the early stages of product development, you’ll understand your financing needs and be able to choose what works best for you.

Forecasting your production costs goes hand-in-hand with creating your production timeline. Estimate your manufacturing costs before you go looking for financing. While you should take a long look at all your financial statements to understand your financial situation, your cash flow statement is key. Pay special attention to this document when you conduct financial forecasting, and regularly monitor the status of your cash (it’s recommended to perform a cash flow analysis at least once a month—if not more often).

With a timeline and forecast in hand, you’ll be more informed to know how much capital you need and when. Read on to discover the right financing options for you.

Financing for Brand New Businesses

Before we talk numbers, let’s take a step back. If you’re preparing to create the first product for your first business, remember that the actual cost of manufacturing is only a (sometimes small) percentage of your overall production cost. Financing a new product business requires capital for legal help, office setup, marketing, hiring employees—and just about everything else you can think of. Even before you actually manufacture the product, you need to go through all the often time-consuming steps of product development:

  1. Product concept (ideation)
  2. Product design (pattern-making)
  3. Materials
  4. Sample Making/Prototyping
  5. Tooling
  6. Production

Once you’ve found a good match in terms of requirements, location, and capabilities, prepare to put down 30-50% of the production cost (you should never put down 100% upfront; it’s best to pay a deposit and then the rest of the balance once you’re satisfied with the final product). Remember, you probably won’t be getting any sales for weeks or months after making this investment, so it’s important to have capital to cover the huge gap that production costs will inevitably create in your cash flow.


If your product is an exciting consumer-oriented product, crowdfunding on sites like Indiegogo or Kickstarter may be a lucrative source of capital for your early business.

Peer-to-Peer Loan

Somewhat similar to crowdfunding, peer-to-peer lending allows you to collect capital from a pool of individuals instead of one institution.

Charge Cards

Charge cards are essentially credit cards with very high (or no) limits that must be paid in full every month. If you can be sure you’ll have the capital to pay off the upfront production costs within weeks, this is a fast and easy option.

Business credit card

As with personal credit, business credit can be very expensive. But if you know you can sell enough (quickly enough!) to cover your monthly payments and pay them off completely in a few months, business credit cards are a flexible and convenient way to go.

Angel Investors

Equity investment is for those just starting out, comfortable with giving away some ownership in your business and looking to manufacture something particularly expensive. Angel investment can cover startup costs, including production.  

Friends and Family Loan

Depending on who your friends and family are and how well you manage the process, these loans can be a great source of capital. For best results, treat this loan like a traditional bank loan, with a written agreement, regular repayment schedule, and interest.

people in hardhats

Financing for Established Businesses

If your business is already (somewhat) established and this product isn’t your first rodeo, you’ve got a lot more options. In addition to all the financing available to new businesses, you have possibilities only open to businesses that have proven themselves viable over time. If you’ve been selling products for over a year with increasing revenue and healthy profits, your business is much less of a risk to lenders, customers, and suppliers.

Term loans

Term loans turn a large, one-time expense into manageable payments over a set period of time. If you have a good grasp of your finances and are confident you can make the repayments, a term loan is one of the safest and cheapest ways to finance the high cost of production. You can get term loans at large commercial banks, community banks, and online lenders like Bond Street.

In fact, Hackwith Design House turned to a term loan when they needed financing for HDH Bridal. “Between sourcing fabrics and dedicating a seamstress to the line full time, a lot of investment is required.” You can learn more about their experience here.

Business line of credit

If you already have a reputable business and a good relationship with your bank, you can seek a business line of credit a few months before you expect to pay upfront production costs.

Trade or Vendor Credit

Suppliers are often willing to partner with businesses they trust. While some may ask for equity in exchange for an advance, many offer extended payment terms that can help you pay for the upfront costs with product sales.


If you’ve built trust among your customer base already, you may be able to pre-sell them on a product that the sales can them help finance. Consider offering your first customers a deep discount and getting them involved in getting feedback on the product before you manufacture it.

Subscription sales

If your product needs to be purchased again and again (like ink or cosmetics), consider selling annual or quarterly subscriptions before you manufacture the product. Much like pre-sales, successful subscription sales can cover the cost of production.

Purchase order financing

If you have a large customer, such a government agency or large corporation, you may be eligible for a special advance from a lender called purchase order financing.


Figuring out how to finance upfront production costs can be tricky. But, you’re not alone. We partnered with Bond Street for a Q&A series in which we sit down with a few NYC entrepreneurs who share the good, the bad and the ugly of their own experience with everyone’s favorite subject: money

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