Sources of funding for small businesses

Q: Can you please offer various options for securing, grants, loans and other financial aid for small businesses?

A: To be clear, there are virtually no grants to be had for a small business unless yours is a nonprofit entity. A search of the internet will help you locate information on grant writing and sources of funding.

However, for those businesses seeking loans and financial aid, the following are options you can pursue:

Family amp; friends are a good place to begin if you are just starting out with limited funds, anyone who may have an interest in seeing you succeed. Traditional sources of funding are hard to come by for a startup business.

Crowdfunding is where good people who want to give back pledge small amounts of money (typically $15 to $50) without expectation of payback. Crowdfunding websites include www.kickstarter.com and www.rockethub.co.

Micro lenders like www.Kiva.org make loans to minorities and low to moderate income individuals. Loans are up to $10,000 at no interest; however, they must be repaid within two to three years. www.us.accion.org lends to both startups and established small businesses. Interest rates start at 8.99 percent for terms ranging from six to 60 months.

Banks want to see a credit score of at least 650 with collateral to secure their loan and generally are prohibited from making unsecured loans. In addition to collateral you must show that you have the skills and background to be successful. A written and thoughtful business plan is a good place to start.

Small Business Administration loan guarantees will help member banks to be more accepting of your loan application. However, SBA fees will add 2 to 3 percent to the interest rate charged by the bank.

Credit unions are nonprofit organizations that, while still adhering to common sense underwriting standards, may be more flexible than banks in making loan decisions for their members.

Angel investors are individuals looking for a higher rate of return than they would receive from more traditional investments. They expect an average 26 percent annual return and most want a 5 to 25 percent stake in the business. Typical investments range from $150,000 to 1.5 million. In addition to their investment, you can benefit from their

advice.

Venture Capitalists are like Angel Investors, only they prefer bigger deals with established businesses. Generally their investments start at the $500,000 level and can go much higher. They will usually want a seat on your board, an equity interest, and expect the business to be acquired within five to seven years. Local angel and venture capital networks can be found online.

Note Some subject matter contained herein was taken from a document created by Doug Carleson, a former SBA lender and current Richmond SCORE volunteer. Gray Poehler is a volunteer with SCORE Naples. Counselors can assist and offer advice concerning management issues facing your small business. Counseling is free. If you would like to register for counseling or have a question, please call 239-430-0081 or fill out the form at http://naples.score.org/mentors. A counselor will contact you within 48 hours. Please include your name, email address and a contact phone number.

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