As you set out to find funding for your new or expanding business, it is important to know all your options. Finding money can be overwhelming and intimidating, but there are many free and helpful sources to get you started.
The Small Business Administration website will educate you on your different funding options. It will also provide you with important information on obtaining funding through the Small Business Administration. It provides a realistic overview of the hurdles you will face. Because it is a government resource, it is unbiased, so you don’t have to worry about scams, and outdated or false information. Contrary to popular opinion, there is no such thing at 100% funding – you will eventually have to put your own money into your business. In addition, there is no such thing as a government grant for an individual for-profit business. The SBA never lends money directly to small businesses unless in the case of disaster resistance. Instead, the SBA guarantees loans from other lenders to provide security. Lenders are more willing to provide loans for small businesses because the SBA guarantees a portion of the loan – generally up to 75% for loans over $150,000.
The SBA offers four types of loan programs – 7(a) loans, special purpose loans (classified under 7(a)), micro loans, and certified development company/504 loans. Each is geared towards a different type of small of business with different needs.
The SBA will provide you with common sense advice (much of which is covered in Game Plan) about preparing for a loan. Before looking for a loan you need to develop a loan package, which consists of three major components:
1) statement of purpose
2) business plan
3)financial statements.
Be organized and clear, detailing what your business does, what you need a loan for, and how you plan to use the loan. You need to be completely prepared for any questions that you may encounter, including what the loan with be used for. You will need to be able to communicate your passion for your business, so that the lender will know that you are committed and excited about being a successful entrepreneur. Remember: the lender will usually have to justify your loan in front of a board, so he must be able to communicate exactly why you want a business loan. Try to show how your business will profit both the lender and the SBA. The lender is looking for a reliable borrower who will pay back the loan on time so that the lender will profit. Show the SBA how they will profit by showing how the loan to your business will improve the economy and create more jobs in your area. Don’t forget who your audience is, and be ready to play to their needs.
Your local Small Business Administration district office will provide you with many of the resources you need to begin. Check out the website to learn about resources in your area, including specifications and laws in your particular area. It also provides free online training seminars in a variety of topics that you will find pertinent to your small business needs (you even get a certificate of completion at the end!).
Finally, check out the many free resources including small business development centers, SCORE (Counselors to America‚Äôs Small Business), Small Business Development Training Network, and women‚Äôs business centers. Do your research, prepare, and you should have all the tools you need to receive the appropriate funding for your business. For more information on funding your business, see the SBA’s Business Funding Primer