While no two businesses are ever exactly alike, they all share a common need: MONEY.
Every business — even the one you plan to operate from home using a computer and cellphone you already own — requires money to get off the ground and, later, to stay afloat.
So now is the time to ask yourself: How am I going to pay for this?
The answer is — using a combination of ways and means:
By traditional methods: self-financing; commercial loans; and public sector opportunities, possibly including SBA loans and Enterprise Florida support programs and/or …
By novel methods: venture capital firms and angel investors; targeted financing opportunities related to race, ethnicity, gender or military service; grants; and crowdfunding.
Let’s take a closer look at your options starting with traditional methods.
Use your own money
Take a hard look at your personal financial assets. How much money do you have? Can you tap into your savings account? Cash out your stocks? Sell that luxury SUV? If these are not viable options, consider a credit card. Many a small business has managed to survive by charging its way through a first year or two of operation. It’s risky, but doable as long as your card has favorable interest rates and you make every payment on time.
Apply for a commercial loan
Commercial loans are typically approved based on the borrower’s capacity to repay as determined by past business experience, personal credit rating and collateral. Without these, you’ll need to rely on your business plan. Make sure it’s a stand-out!
Potential sources of commercial loans for small businesses include:
- Commercial Banks, many of which have entire divisions devoted to small business lending and convenient online 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 commonly charge higher interest rates.
- Digital Banking Platforms, which typically provide many of the same services as traditional commercial banks and credit unions but with a twist — all transactions are digital.
Tap into public sector programs.
The U.S. Small Business Administration (SBA) does not lend money directly to small business owners; it sets guidelines for loans made by its partnering lenders, community development organizations and micro-lending institutions. 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. Demonstrated ability to pay the money back is the primary consideration for acceptance, and approval rests with the lending institution, not with SBA.
Florida-Based Financial Support Programs facilitated by Enterprise Florida Inc. (EFI) match qualifying small businesses with lenders that can provide financial assistance and lines of credit. Options include:
- Small Business Loan Support Program
Consisting of EFI’s State Small Business Credit Initiative (SSBCI) and Microfinance Guarantee programs, this program helps small businesses obtain loan approvals and leverage private capital for use in startup costs, working capital, business procurement, franchise fees, equipment, inventory or the purchase of owner-occupied commercial real estate.
- Venture Capital Program
The EFI-sponsored Florida Opportunity Fund provides venture capital for startup and early-stage businesses taking one of two forms: a state-run venture capital fund (which may include other private investors) that invests directly in businesses; or a fund of funds that invests in other venture capital funds, which, in turn, invest in individual businesses.
Still in need of capital? Consider these less conventional sources.
Attract a private investor.
Venture capital firms or private individuals called “angels” may be willing to invest in your business if they see high potential. Venture capital firms are typically controlled by banks, insurance companies or large corporations; angels, on the other hand, are wealthy individuals looking to support “hot” ideas and untapped investment opportunities. In return for backing 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 Venture Forum.
Seek targeted financing.
Your unique 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 nonprofit economic development organization providing bilingual assistance to entrepreneurs seeking to access capital in the form of traditional bank loans as well as SBA and micro loans.
Are you a female?
While no government loan programs exist exclusively for women business owners, recent history shows that SBA loans are three to five times more likely to go to women than non-SBA-guaranteed loans. Consult the list of women’s business centers in our “Ask an expert” guide helpful contacts.
Obtain a grant.
Almost no federal grant money is available to launch for-profit businesses. 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 from realizing your entrepreneurial dreams, consider crowdfunding as a way to raise small donations from many people. Just be careful. The SEC has specific rules about what you can and cannot do, and you will need a platform such as Kickstarter or GoFundMe to accomplish the job. If you’re interested, look to the specialists at your local Florida SBDC office for advice and do your homework before signing on to anything.