Small Business Advice
Alternative sources of funding for Small Business
QUESTION: I have limited resources and need financial help in starting a new business venture. What programs are available to low income, women and minorities?
ANSWER: To be honest, there is no quick and easy solution to fund a start-up business when you have limited resources and a less than stellar credit rating. Crowdfunding websites like www.kickstarter.com and www.IndieGoGo.com are a possibility. Also micro lenders like www.kiva.org make loans to minorities and low to moderate income individuals. Banks typically want to see a credit score of at least 650 with collateral to secure a loan.
My advice to clients is to first develop a written business plan and determine how much money you will need to cover start-up costs and ongoing expenses until you reach the break-even point, usually 6 to 9 months. Most new ventures fail within two years due to inadequate capital.
Rather than trying to start from scratch with little or nothing, keep your current employment and start now to save something from each paycheck until you have accumulated enough to take that “leap of faith.” If you are young, you have many years to fulfill your dreams.
In addition to personal savings and help from family and friends who share your vision, there are programs like a community development financial institution. A CDFI is a small private sector financial institution like a community bank, credit union, or community development fund.
Small businesses that will most likely find assistance with financing from a CDFI include low income, minority, and women owned. Minority and women owned or MWBE businesses should make sure they are certified as MWBE.
CDFI’s may be able to help you qualify for different lending programs including SBA and conventional loans. They also offer various services that include Business Plan preparation, pro bono legal assistance, and credit repair.
When you’re ready to work with a CDFI to get small business financing, you need to come prepared with all the documents needed for a complete loan package. Documents you should have ready include:
- 3 Years of Business & Personal Tax Returns (if available)
- Business & Personal Credit Reports
- 6 Months Business & Personal Bank Statements
- Year-to-Date Balance Sheet
- Year-to-Date Profit and Loss Statement
Borrowers can find assistance with CDFI’s through SCORE or SBA Small Business Development Centers. A detailed explanation of the program and state by state program participants can be found at https://fitsmallbusiness.com/community-development-financial-institutions-cdfi-list/
Gray Poehler is a volunteer with SCORE Naples. Business counseling on this and other business matters is available, without charge, from the Naples Chapter of SCORE. Call (239) 430-0081 or visit https://naples.score.org/mentors.The SCORE business office is located at 900 Goodlette Road North, in the Fifth Third branch bank building. Office hours are 9 a.m. to noon, Monday through Friday.