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What Type of Funding is Best for My Startup or Growing Business?
Included with our Business Plan Development service is Funding Search Assistance. This is unique in the industry as very few firms offer a full solution to funding. Once your business plan is complete and approved by you, we can begin to seek out investors through our network that are interested in projects like yours. Helping you get funded is our top goal with every project. Having the right relationships are a major part of successful fundraising. While funding can’t be guaranteed, this free service will provide opportunities other companies don’t offer.
Bank/U.S. Small Business Administration (SBA) Loan
A bank loan can involve a business loan through a bank, as well as real estate loans/mortgages (using your home equity as collateral), lines of credit, and SBA loans. SBA loans, much like FHA loans for home purchases, are made through a bank or lending institution, and the SBA guarantees a portion of loan payment back to the lending institution.
Depending on the bank, lending decisions are made in-house at the local branch or on the national level. A business plan is always necessary for this funding choice.
Advantages
- Lower interest rates mean that you pay less on the money you borrow than any other method.
- A number of programs to help entrepreneurs qualify.
- Ability to decrease cost to business by paying loan off early.
Disadvantages
- Down payment or collateral is almost always necessary, usually between 10- 25% of the total funding needed.
- Some banks require you to host business accounts through that bank, which could cost you extra in fees in the long-run.
- If business fails, loan still must be paid back in most cases.
Equity Method – Angel Investors or Venture Capital
Investors generally want equity in your business – basically a percentage of ownership in your company. This is accomplished by issuing stock or “membership units” for a Limited Liability Company or LLC.
Stock and membership units are essentially identical, just different terms for different organizations.
This method is generally preferred if an entrepreneur plans to exit the business in 5-8 years. Business plans and pitch decks are usually required.
Advantages
- Lower risk to entrepreneur – if business fails, generally nothing is owed to investor.
- Requires no startup capital from entrepreneur.
Disadvantages
- Loss of sole ownership in company.
- Usually requires attorney for proper documentation of agreement.
- Investor is sometimes looking for 8-10 times return on investment.
Royalty Method – Angel Investors or Venture Capital
This method, which is less common today, provides investors with royalties on your company’s returns instead of a piece of ownership in your company. Royalties can include providing the private equity investor a percentage of sales or net income.
When utilizing royalties on net income, investors and owners strive toward the common goal of increasing overall profits. Business plans and pitch decks are usually required.
Advantages
- Lower risk to entrepreneur – if business fails, generally nothing is owed to investor.
- Requires no startup capital from entrepreneur.
- Generally results in better working relationship with investor because of common goals.
Disadvantages
- Usually requires attorney for proper documentation of agreement.
- Investor is sometimes looking for 8-10 times return on investment.
How long will it take?
The estimated timeframe for a typical project can vary depending on your needs. A rush can be executed upon request in many situations. Contact us directly for a price and timeframe quote.
Other Loan Programs
These programs are generally offered by smaller lending companies that are willing to take more risk. These other loans are generally online and will require a full business plan to qualify.
Advantages
- Higher interest rates will still be more favorable long-term than investor payback.
- A large variety of programs and companies in business to help entrepreneurs qualify.
- Ability to decrease cost to business by paying loan off early.
Disadvantages
- Higher interest rates than traditional bank lending.
- If business fails, loan still must be paid back in most cases.
Keys to Getting Startup Funding or Expansion Capital
Combine Funding Methods
Many entrepreneurs will combine several funding methods, such as acquiring an investor to get cash on hand as a stop-gap while getting approved for a bank loan.
Bring Money To The Table
The more money you have to contribute, the more likely you are to get funding.
High Quality Business Plan and Deck
This is obvious, but you only get one shot. Don’t blow it with low-quality work. You’re there to impress investors and stand out from the crowd – and there is a large crowd.
An Idea That Solves A Problem
The best businesses solve a societal problem.
Have The Right Team
Investors want to know that you have the right team in place to run your business, both in management and professional services.
Know Who To Approach
Individual banks and investors have specific types of businesses where they like to focus. They are comfortable within certain industries or areas of expertise. Knowing the appropriate investor to approach is half the battle.
Let’s Get Started
If you call us at (844) 204-9522, you may notice that your call goes directly to a project manager. We don’t employ salespeople. Your call goes to a project manager every single time. We believe that if we are going to provide our clients with a customized and personal business plan, then we should be there to have a personal conversation every time our clients call – from the moment a client inquires about a service until the business plan is complete.
