Funding Guide

Funding a Business

Think about and research the questions below before deciding on the best funding options for your business.

Tools to help identify your financial needs:

Tips on estimating startup costs (SBA)

Online startup costs calculator (Bplans.com)

Business Startup Cost Calculator (Zen Business)

What does my financial world look like?

  • The money you might need as a startup business may be different from what a more established business will use. The type of industry sector your business is in can affect the type of financing available. The more you understand about your industry and current financial needs, the easier it will be to identify the programs that make the best fit.

SBA offers a FREE web series – Financing Your Business

What will you use the funding for? (Is that amount absolutely necessary?)

How much money do you need to start?

  • No two businesses are exactly alike. The money needed for startup funds can vary from location to location. It is important that you understand what your financial needs will be before looking for funding options. This can include ‘seed’ money, to help cover the costs of doing business in the first few months of operation, as well as funds to cover ongoing fixed expenses (rent, utilities, administrative costs, etc.) and variable expenses (inventory, shipping costs, sales commissions, etc.).

What is your plan for how you will pay it back?

What will a traditional lender look at during the loan process?

  • Your credit risk – commonly referred to as “5 C’s”:
      • Credit History
      • Capacity
      • Collateral (When applying for secured loan)
      • Capital
      • Conditions

What Financing Programs are available?

  • Find out what financing opportunities might work best for your business.
    • Friends and Family
    • Types of Loans
    • Private Capital
    • Grants

Funding Opportunities

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.

Each county has a Small Business Development Center (SBDC) that can help you determine your startup or expansion financing needs. They also provide counseling for business planning, marketing, and more.

Friends & Family

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.

Commercial Bank Loans

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

Visit the Loans Guide to learn more about available opportunities.

Common Loans or Credit available:

Line of Credit

Home equity loans 

Equipment lease financing 

Cash advances from credit cards 

Factoring

SBA/Bank Loans

Grants

Most grants are for nonprofit organizations, not small businesses.

Be aware of advertising suggesting a list of grants if you pay. Often this is a list of microloan programs – which you must repay – or grants for nonprofit agencies.

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

Visit the Grants & Incentives Guide to learn more about available opportunities.

Example: 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.

Micro-Loans

Microloans are often less than $50,000 and focused on start up businesses who do not qualify for a commercial bank loan.

Central Florida has 2 non-profit microlenders that partner with BizLink Orange.

Ascendus         BBIF

There are for-profit lenders and microlenders. Do your research and know what their terms and conditions are before signing any agreements.

Angel Investors

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 Capitalist (VC)

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.

Visit the Private Capital Guide to learn more about available opportunities.

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