Find a Way to Pay for It

Now that you have your business plan in writing, it’s time to address the issue every business owner has in common: How are you going to pay for it?

Even if you plan to run your business from the comfort of your own home, you will still need funding to get off the ground, stay afloat and fuel growth.

In the early going, you may be able to support it with money you’ve saved. But it is highly likely that one day in the future, you will need other resources. Now is the time to start working on the financial relationships that may be key to your success.

Your options can generally be divided into two broad baskets of funding sources:

Traditional funding: These sources include self-financing; commercial loans; and public sector opportunities such as SBA loans and FloridaCommerce Office of Small Business Innovation support programs.

Innovative funding: These funds come from venture capital and angel investors; targeted financing opportunities related to race, ethnicity, gender or military service; grants; and crowdfunding.

TRADITIONAL FUNDING

TAKE MONEY FROM YOUR OWN POCKET

First you need to assess your own financial assets. How much can you really afford to divert to your business? Can you tap into your savings account? Do you have stocks to cash out? Could you trade your luxury car for a more modest ride? If you are still looking for options, consider a low-interest credit card. It is a risky path, but some small businesses survive a year or two on credit. Just be sure to read the fine print before you sign anything and be extra vigilant about making timely payments.

SEEK A COMMERCIAL LOAN

This is where the business plan from Step 4 will come in handy. A commercial loan will typically be approved based on your demonstrated ability to repay, based on past business experience, personal credit rating and collateral. Some of these hurdles may be difficult to clear for an aspiring entrepreneur. In their absence, a stellar business plan could provide the boost you need to seal the deal.

Sources of commercial loans for small businesses:

• Commercial banks, many of which have entire divisions devoted to small business lending and convenient on-line banking options.
• Credit unions, offering small business loans and online banking options with an emphasis on personal service.
• Commercial finance companies, often willing to take higher risks than banks, but likely to charge higher interest rates as a result.
• Digital banking platforms, typically providing many of the same services as commercial banks and credit unions but with a twist — all transactions are digital.

TAP INTO PUBLIC SECTOR PROGRAMS

Unfortunately, you can’t borrow money directly from the U.S. Small Business Administration (SBA). Instead, you need to work through partnering lenders, community development organizations and micro-lending institutions that use guidelines established by the administration. SBA-guaranteed loans generally have rates and fees comparable to non-guaranteed loans and typically feature lower down payments, flexible overhead requirements and, in some cases, no collateral requirements. The most important consideration is a demonstrated ability to pay the money back, with approval resting with the lending institution rather than the SBA.

Florida-based financial support programs facilitated by FloridaCommerce, match qualifying small businesses with lenders that can provide financial assistance and lines of credit. Options available in this category include:

• State Small Business Credit Initiative
  The Florida State Small Business Credit Initiative (SSBCI), administered by FloridaCommerce, offers several programs to help small businesses obtain loan approvals and leverage private capital for use in startup costs, working capital, business procurement, franchise fees, equipment, inventory and/or the purchase of owner-occupied commercial real estate.
• Florida Opportunity Fund
  The Florida Opportunity Fund provides venture capital for startup and early-stage businesses. This support comes in one of three forms: (1) a clean energy investment program for businesses to increase the use of energy-efficient and/or renewable energy technologies, equipment or materials; (2) a state-run venture capital fund that invests directly in businesses; and (3) a program to invest in seed or early-stage companies in order to realize significant long-term capital appreciation.

INNOVATIVE FUNDING

ATTRACT A PRIVATE INVESTOR

If your business offers “high potential,” you may be able to grab the attention of venture capital firms or private individuals called “angels.” Venture capital firms are typically controlled by banks, insurance companies or large corporations; angels, on the other hand, are wealthy individuals looking for “hot” ideas and untapped investment opportunities. If they back your business, these entities typically expect some level of control and/or a percentage of future profits. See list of Florida venture capital firms or visit Florida Venture Forum.

 

FIND TARGETED FINANCING

Your race, ethnicity, gender and/or military service may open doors to targeted funding and educational opportunities.

Are you a person of color?
The Black Business Loan program provides loans, loan guarantees and/or investments through loan administrators to Black business enterprises that cannot otherwise obtain capital through conventional lending institutions.

Do you have Hispanic ancestry?
Look to Prospera, a state-wide, not-for-profit economic development organization devoted to assisting new and seasoned Hispanic entrepreneurs with bilingual services and access to a variety of funding options, including traditional bank loans and micro loans. For a list of Prospera sites in Florida, visit prosperausa.org/where-we-work.

Are you a female?
Despite recent surges in the number of women-owned businesses across the U.S., men still have the upper hand when it comes to approvals for small business loans. But that could easily change. In 2024, women owned nearly 40 percent of U.S. businesses, generating $2.7 trillion in revenue. Who knows what 2025 might bring? In the meantime, consult the list of women’s business centers in our “Ask an expert” guide for helpful contacts.

Are you an active duty or veteran military man or woman?
Look to the SBA for information regarding programs and services aimed at helping you start a business. Programs include a two-day intensive program entitled “Boots to Business” to help prepare you for the rigors of business ownership.

 

PURSUE A GRANT

Almost no federal grant money is available to launch a for-profit business. However, some businesses engaged in scientific R&D may qualify for federal grants under the Small Business Innovation Research (SBIR) and the Small Business Technology Transfer (STTR) programs if their projects meet federal objectives and have a high potential for commercialization. For details, visit SBIR.gov.

And for information about grants available through state and local programs and nonprofit organizations in Florida, visit floridagrantwatch.com.

 

GIVE CROWDFUNDING A GO

If a lack of money is the only thing keeping you on the business sidelines, consider crowdfunding as a way to raise small donations from many people. Just be sure to do your research. The SEC has specific rules about what you can and cannot do, and you will need to use a platform such as Kickstarter or GoFundMe. If crowdfunding interests you, look to the specialists at your local Florida SBDC office for advice and do your homework before signing on to anything.