Funding Guide

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Need a cash infusion for your business?

Looking for Funding

A variety of ways to find funding

It is very difficult for a “start-up” business to attract funding from a traditional bank.  Most banks will require a personal guarantee and some type of collateral, such as your home.  Most new businesses rely on investments from friends, family, or personal savings to start a business.

Many funding opportunities require a solid business plan. Review the Startup Guide for tips and tricks to best assist in writing or strengthening your business plan.

What you need to think about:

  • How much money do you think you’ll need?
  • What will you use the funding for? (Is it absolutely necessary?)
  • Do you have a plan for how you will pay it back?

Determine the Best Source of Funding

The Truth About Free Government Grants

I need a grant for my business. What is available?

Unfortunately, most grants are for nonprofit organizations, not small businesses.  BE VERY CAREFUL of advertisements promoting “free money for your business.” These ads can be very misleading, often suggesting that you can receive a list of many grant sources for a fee of a few hundred dollars.

Frequently this is a list of microloan programs – which you must repay – or grants for nonprofit agencies.

The federal government does offer a few very competitive and targeted grants to companies developing various targeted technologies (often high technology).

This article by the U.S. Small Business Administration provides a bit more detail regarding what is available and what isn’t available.

Our Resource Partners provided a few places to start looking for grants:

Family & Friends Funding

You, your family and friends are the main source of funding at this stage. You may also consider using your personal savings, a home equity loan, or borrowing against your insurance policy as a place to start. The following articles give some timely tips on using personal resources to fund your business.

Types of Loans Available

Commercial bank loans don’t require entrepreneurs to turn over equity or company control. In general, banks prefer to make loans of more than $10,000. Banks like to see:

  • Good credit
  • A solid business plan
  • Ability to repay the loan
  • Collateral

Line of Credit is an arrangement in which a bank extends a specified amount of credit to a specified borrower for a specified time period.  A line of credit is best suited to help cover expenses that tend to fluctuate throughout the course of a year.

Home equity loans are a cost-effective alternative to other types of loans because they offer good interest rates available.  But you may not want to risk your family home to launch your business venture.

Equipment lease financing gives you access to many types of equipment — computers, copiers, fax machines, cars and trucks — without tying up your cash or credit lines. Although it doesn’t bring in cash, leasing reduces the amount of cash you otherwise have to raise to start.

Cash advances from credit cards are an easy and quick way to gain access to cash.  But as a long-term financing method, they can be expensive — credit card interest rates typically run much more than you would likely pay on a bank loan.

Factoring allows a company to “sell” its accounts receivables to an outside company at a discounted rate. This allows the company to receive funds immediately to fund operations and ease cash flow. Factoring is done by private companies.

The SBA provides a summary of their loan products.

SBA/Bank Loans

Once you’ve determined that an SBA or traditional bank loan is the right kind of financing for your business, you’ll need to package your financial information in a way that makes it easy for a banker to make a favorable decision. At the most basic level, you will need to provide:

  • Basic information about your business
  • Basic information about the loan you are requesting
  • Financial information about your business

We highly recommend that you work with one of our network Resource Partners who are skilled in helping business owners prepare themselves to approach funding sources. Simply search for financing assistance in the Resource Navigator to find the right organization near you.

Angel and VC Investment Groups

Angel and Venture Capital Investment Groups

Angels give wings to entrepreneurs. They provide seed money to business startups—to the tune of tens of thousands to a million dollars or more—in exchange for convertible debt or ownership equity. Some angel investors come together to form angel groups or angel networks to share research and pool investment dollars.

Venture capitalists (or VCs), on the other hand, usually make their capital investments later in the business cycle. They exchange their investment and their expertise for a significant portion of the company’s ownership and significant control over company decisions.

Before you approach an angel investor, angel network, or VC firm, ask yourself and your partners these questions:

  • Am I willing to give up some amount of ownership and control of my company?
  • Can I demonstrate that my company is likely to gain significant revenues and earnings in the next 3-7 years?
  • Can I demonstrate that my company will produce a significant return for investors?
  • Am I willing to take the advice from investors and accept board of director decisions I may not always agree with?
  • Do I have an exit plan for the company that may mean I’m not involved in 3-7 years?

You’ll need to follow those answers with a solid business plan and an executive summary that includes:

  • Financial overview for at least three years out
  • Sales and marketing plans
  • Three-to-five year goals and your action steps to get there
  • Exit strategy

Who can help? BizLink Orange has a comprehensive list of venture capital providers in Central Florida.

Technology Grants

Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) grants fund research and development efforts of a high-risk nature that may have excellent commercial potential.

Small U.S. businesses are eligible to participate in the SBIR/STTR program if they are for-profit and have 500 or fewer employees. Nonprofit organizations are not eligible.

Simply search the BizLink Orange Resource Navigator for business grant providers in Florida to find organizations that can work with you to help you.