Understanding Financing Options

Understanding Financing Options

Understanding the lending process and program options is overwhelming and often unfamiliar for entrepreneurs. Even those more aware of the process can forget or ignore traditional funding sources. Setting a business up to be able to cash flow and build financial success often takes a multi-program approach. These considerations are relevant for start-ups and expansion projects.

When seeking financing for a start-up or expansion, it is important to have the groundwork in place to know what approach will be the most successful and help your resources. Key parts to have prepared before beginning the financing conversations include:

• summary of what you are trying to accomplish
• a list of what is needed to make it happen
• estimated costs

Financing changes depend on what is needed for the project. Real Estate is handled differently than equipment, which is different from inventory and working capital.

The various elements of business start-up and expansion all begin to move simultaneously. You are planning, researching, developing, and seeking financing at the same time. Reaching out for assistance will be key to helping you feel like you aren’t going in circles and finding the right fit in moving forward. These are conversations and questions you would have as a client of the ND SBDC with your advisor, as well as potential programs that could help build a feasible financial package.

Other key resources for understanding the financial options available include:

Economic Developers – The local economic development organization in your area will have their programs and be interested in how you want to invest in the local economy.

Fellow Entrepreneurs – They have been there and done that. This can be a complex topic to approach as it includes private information. However, find an entrepreneur you have a trusted relationship with or know has had success in the same industry outside of your market.

Lenders – Local, state, and federal financial programs commonly require the applicant to have a lead lender. Lenders assist in creating the financial package and helping understand what programs they are able and willing to work within their bank. You may already have a relationship with a bank or shop around to see who will work with your project and what terms they have.

Regional Councils – Regional Councils are boots-on-the-ground resources that diversify a state’s economy and support. They are interested in the business activities of their region and often support the economy through various funding programs.

State – State agencies are also available as a resource. The economic developers or regional councils often have a relationship and understand what state programs apply to your project.

Federal – There are federal programs that are active in your state. Similar to state programs, it can be helpful to visit one of the above resources to understand better what those programs are and what may be a fit for your project.

Non-traditional Financing – This title is saved for funding opportunities that don’t fit into a program. There are options ranging from personal investment to angel funding or using a program like Mainvest.

If you hear of programs that you think may be an option for you, don’t hesitate to bring it to the attention of your advisor or lender. They can help to navigate the eligibility, details, and application process to understand if it is a good fit. The more questions asked, the more information you will have to be able to set your business up for success through a feasible financial package.