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Spent a long career making lots of money for other people. Now it's my turn. _____________________________ Email:

Tuesday, April 11, 2006

Funding the Business

During the past several days, Mark Terry has put-up a series of informational Posts on such topics as; agent's expectations, editor's expectations and, of course, "money", to name a few. For those of you who haven't met Mark, he is a professional full-time writer. I have included the link to him below.

Mark's post titled; "money and its writer is soon parted", speaks about personal expenditures involved to promote his published book(s). He also talks about writing as a business. It is from his comments on the business of writing that I have stolen a topic to post here.

"Writing is a business", is a statement frequently made in blog postings and the comments on postings. Presuming the statement to be true, it seems appropriate to exchange ideas on how various writers have arranged to provide (secure) the necessary operating capital to fund their individual writing businesses. I'm not talking about "profit" here; I'm talking about "cash flow". Cash flow being defined as the money available to purchase the equipment and supplies necessary to write the book and then fund the promotional requirements of publication. In addition, it is the money available to pay normal living and household expenses while the book is being written or, while off traveling to promote the book, etc.

All types of businesses that I am aware of require a certain amount of available cash to operate. Some use lines-of-credit, some have accumulated their own cash reserves, some use private investment money, etc. The point is that if we are going to operate our writing businesses as bona fide businesses, we need cash available to do so over the length of the "marathon", as it has been described.

Please elaborate on the subject to the extent you are comfortable. My question, however is:

Have you ever attempted to obtain a bank loan to fund your "writing business? A worthwhile site to visit.


Blogger jason evans said...

No, and I wouldn't want to hang from the end of a rope until I got one. Unless you have a personal banking connection, I imagine you'd provoke a decent amount of laughter. But that's just a guess on my part. A grant for the arts might be a better way to go.

1:14 PM EDT  
Blogger Sandra Ruttan said...

Bank loan?


I'm funded by my hard-working spouse.

But here there are also arts grants you can get to help with the expense of promoting a book, and believe me, I'll be applying as soon as I'm eligible.

And it is a business. But maybe that's what separates some- some want a career as an author, others just want to be a writer in their free time. I don't know. I just know that it takes time and effort and personal investment in order to build any business, and writing is no different.

2:36 PM EDT  
Blogger Shesawriter said...

No. Wouldn't do it. I fit writing around everything else. I've got too many responsibilities to do something like that.

2:44 PM EDT  
Blogger Erik Ivan James said...

Jason: You are likely correct about laughter at the bank. The expression; "colder than a banker's heart", exists for good reason.

Samdra: Up until recently, my spouse supported my habits too.:)

Question: If a writer doesn't have the personal financial wherewithal to promote, travel, etc.; does that put an otherwise good writing in the trash as far as a publisher is concerned?

2:48 PM EDT  
Blogger Erik Ivan James said...

Tanya; Would you take a bank loan to open, say, a shoe store? If so, does that mean you view the potential to make money at writing a greater risk than opening other kinds of businesses?

2:54 PM EDT  
Blogger Sandra Ruttan said...

"Question: If a writer doesn't have the personal financial wherewithal to promote, travel, etc.; does that put an otherwise good writing in the trash as far as a publisher is concerned?"

Not necessarily. Publishers have lots of writers they don't promote, and they can't expect everyone to quit their day jobs to do it themselves.

One contract I was offered included a clause that I agreed to show up anywhere the publisher insisted for promotional purposes, at my own expense. Guess who I didn't sign with? There's a lot of promotion you can do online, via radio, etc. that has far-reaching appeal. I was reading Ian Rankin's books YEARS before I ever saw him in person, and his was the first author event I ever attended in my life.

So not all us die-hard junkies are converted through tours.

6:34 PM EDT  
Blogger Candice Gilmer said...

I'm still in the process of promoting myself as a writer, my first book is coming out this summer. Would I go to the bank for a loan? HAHAHAHAHAHA......... Not hardly... (have enough debt as it is thanks...)

I would, if something absolutely had to be done, see what I could come up with... Even consider bartering with some contacts I have for help if necessary... :)

8:12 PM EDT  
Blogger Candice Gilmer said...

I'm still in the process of promoting myself as a writer, my first book is coming out this summer. Would I go to the bank for a loan? HAHAHAHAHAHA......... Not hardly... (have enough debt as it is thanks...)

I would, if something absolutely had to be done, see what I could come up with... Even consider bartering with some contacts I have for help if necessary... :)

8:12 PM EDT  
Blogger Bernita said...

Simply, no.
Part of the question lies in the "if only" dream - if only I had time I could write a great book, if only.
We have this image of the successful writer with his pipe in his booklined study( or Barbara Cartland on her chaise lounge) and do not realize that only came after much success - that the first books were usually written between flogging enclycopedias, or mcuking out stables or whatever.
Having to cram it in around a mundane job can keep a writer in tune with real life and provide a discipline.
Bet one might be able to get a loan if they were opening a small press though.

6:00 AM EDT  
Blogger Erik Ivan James said...

Sandra: To your knowledge, are author promotional expectations standard clauses in present day contracts?

Candice: Thanks for stopping by. Your comment about bartering with existing contracts is interesting. Similar is done in busines using accounts receivable.

Bernita: I agree with all except "opening a small press". My impression is that small print shops are not doing very well these days. Jobs they formerly did are now being done in the office. I could be wrong though.

11:58 AM EDT  
Blogger M. G. Tarquini said...

Bankers wouldn't deny those loans because they are coldhearted, they base their decisions on risk vs. return. Loans require a business plan. How can a writer present one that isn't laughable? How many people do we meet in blogland that aren't appreciably farther along the path to publication than they were six months ago? Writers aren't selling shoes. They are selling words. They sell those words in a market already saturated with words. Words never wear out, though they can go in and out of style.

Most small businesses take five years to turn a profit. Even if they go belly up, there might be inventory to sell off to help defray the costs of the loans. How many writers learn to write, get agented and get published in five years.

The interesting thing about writing is that everybody with a word processor think she or he can. But there's a learning period, and a curve. How many are willing to put in the four or more years to learn their craft, then enter the travails of apprenticeship or residency - that awful time period of submitting, writing, rewriting, etc for little or no pay?

Of course a bank would laugh. Show them hard evidence there's reason to invest in you, they will.

2:35 PM EDT  
Blogger M. G. Tarquini said...

This comment has been removed by a blog administrator.

2:36 PM EDT  
Blogger Erik Ivan James said...

The "cold heart" comment about bankers was meant as humor. To those out there who are bankers, or have bankers in the family, I apologize if I gave any offense.

On topic, your points are well presented, Mindy.

It might be possible, however, to secure a loan if the writer has, and is willing, to put up an appropriate amount of collateral to mitigate the bank's risk.

My experience, having negotiated several business deals on behalf of others, is that if there is enough collateral to secure the loan, money is available, even for what on the surface may appear as a marginal-at-best venture.

I have also seen the opposite. I've participated in situations where the business venture was very promising but the people seeking financing did not have enough personal collateral available to satisfy the banks requirements. Consequently, no bank loan. They were forced out into the private sector of venture capital, etc. Even, when the bankers valued the venture as having a high probability of success.

With regard to business plans, I'm thinking that a writer who intends to write more than one book, should have one. If a writer has the ability to publish more than one, then they are in the writing business for real.

A writer's plan may not necessarily follow the standard business plan format which would include; description of business, products/services, ownership, management, long-range financial projections, sources and use of capital, critical risk factors and the like. But, it might include some of the standard business plan elements such as; marketing/advertising, targeted markets, milestones, legal/accounting relationships, time-lines, etc.

I agree with you there certainly is a learning curve to deal with for the most of us. I can for sure attest to that on a personal level.

For those who have advanced education or experience in the technical aspects of writing, however, it would seem the learning curve would be much shorter. Combine the proper writing related education factor with the natural ability to tell a good story or, possession of an in-depth knowledge on particular subject matter, maybe now you have someone who is "bankable" given other reasonable considerations.

Your turn, if you care to take one.

3:59 PM EDT  
Blogger ivan said...

Many times.
But it involved a banker who took a shine to my work and became a pesonal friend.
Certainly got me out of a jam in Mexico. I was researching a novel and realized, there in Margaritaville that I was flat broke in a foreign country and didn't even have gas for my crapbox to get back. How to get the money to me, a long-distance loan based on The Fire in Bradford, a book I was writing. Jown Walton had seen reviews of my oher books in the papers and took a gamble, getting on the computer, making up a special plate for my bankcard so I could access the loan money.
I pulled up alongside what amounted to a barrel cactus with a banking machine alongside. Barrel cactus indeed! The damned thing spewed money.
I was a great friend of the Royal Bank for a long time.
The odd thing is that when the book was finally published (and me broke again) John, a bank manager didn't have the money to buy my first edition ("I don't carry money around on me"). So I had to wait for the following day until he found the twenty bucks. Weird.
Unfortunately, I never did pay back the full amound of $400 American and John and I were almost the laugh of the town.
"See that screwed-up writer walking down Main?"
"And see that depressed-looking guy twenty paces behind him?"
"That's his banker."
Writers seem to share traits with con-men and cleaners-up of ferry boats.
I tried to pay John back later, but he was transferred to B.C.
Oddly enough, he remained my friend.

6:16 PM EDT  
Blogger Erik Ivan James said...

Good story, Ivan. Thank you for telling it here. Adds another perspective.
The banking relationship you describe is one as they used to be. When banks placed value on the potential of the individual along with, the potential of the numbers.

10:52 AM EDT  
Blogger M. G. Tarquini said...

Putting up collateral changes the nature of the loan. It's no longer a 'business' loan to the bank. It's a secured loan. It's a home equity loan, or secured with stocks, an escrowed tangible the bank can take if and when the individual defaults.

Your advance from your publisher is your loan against your potential. The publisher is betting that you will earn out. And it's better than a bank loan because you're not expected to pay it back, if you don't earn out, even if your contract says you are supposed to.

I want to know the name of any bank that would give an unsecured loan to a non-earning writer or an out-of-work actor, or a sculptor or artist, because that's a bank where I won't invest my money.

They are called arts grants, because nobody expects to see a payback.

12:18 PM EDT  
Blogger Erik Ivan James said...

Yes, collateral changes the nature of the loan.

You and Jason mentioned 'grants for the arts'. An informed post on that subject could be meaningful to aspiring, but serious, writers needing money on their way to a publisher's advance.

As always, Mindy, good comments.

12:42 PM EDT  
Blogger M. G. Tarquini said...

I can't give that informed post. I don't know anything about grants. I've just heard they are out there.

12:47 PM EDT  
Blogger Erik Ivan James said...

Yeah, I'm not informed on the subject either. I do intend to do a little research though.

Maybe someone who is informed on grants for the arts will stop by and give us a summary.

3:44 PM EDT  
Blogger Dana Y. T. Lin said...

I don't know anything about grants for the arts, but I think I read somewhere that JK Rowling got some kind of grant money to finish her first Harry Potter book.

Of course, they probably do things differently over there involving grant money.

If I won the lottery, I'd set up some grant money for the art of Bunions.

7:53 PM EDT  
Blogger Erik Ivan James said...


..."If I won the lottery, I'd set up some grant money for the art of Bunions."...

I suspect that would be well rewarded indeed.

7:32 AM EDT  
Blogger Mark Pettus said...

I finance my writing by writing, and yes, I have considered getting a loan to help me grow my writing business.

Writing novels is a passion for me, but writing as a business is more than fiction and query, it can be copywriting, or copyediting, or proofreading, or freelance journalism - all of which are easier to sell than a novel.

I must warn you, though, that writing something other than your passion takes just as much time away as any other job, and actually diminishes your creative juices at a much higher rate than, say, being a blacksmith.

10:31 PM EDT  
Blogger Erik Ivan James said...

Mark: Thanks for stopping by. You know, up here in northern Michigan, it's almost time for the blue cheese 'n steak. Getting real close.

Excellent point about writing other than your passion, and the consequences of it draining creativity.

7:09 AM EDT  

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