Funding
Local Funding Sources
Local Banks and Credit Unions
It will never hurt to sit down with the small business person at your local bank or credit union to discuss your business idea and what you want to do. It does not cost money to fill out an application and to give them your business plan. This is a great way to get a sense of the process and how they rank your risk.
Ultimately, some business loans are rejected if there is no collateral (assets such as a mortgage) and the business seems too risky. Sometimes the bank will do an SBA Backed Loan when there is this risk, but, you still apply via the bank or credit union.
Personal credit scores are looked at in the initial funding process, so working on getting your personal financial house in order is important.
Learn more about personal financial health - Investopedia article & Nerd Wallet Financial Health Score
Thomas Howard, Assistant Vice President of People's United Bank gave an information-packed presentation about various bank products and how you can get ready for a loan. Reach out to him if you have questions: 978-259-1000 | (C) 781-424-2204 | (800) 894-0300 Email Thomas.Howard@peoples.com | www.peoples.com
Other Local Funding Sources
Lowell - Downtown Venture Fund - a unique loan fund for those wanting to start a business in Downtown Lowell
Community Teamwork's Entrepreneurship Center - Microloan Fund - if you are unable to get a traditional bank loan, there are microlenders who are focused on providing loans to those who are turned away from the bank, or may not have great credit.
Ascendus, another microlender
Check out the Middlesex Community College's Everyday Entrepreneur Venture Fund - seed funding, this means they are investment grants and do not need to be paid back
Looking for a small amount of funds for your MVP? Check out the MCC Student Venture Fund
Consider crowdfunding platforms for friends and family
Be mindful
When using credit cards to start a business, remember credit cards have high interest rates and you don't want to be stuck paying back even more than you would with other options.
Beware of payday loans, cabbage loans and point-of-sale loans
Read
Fund Your Business by the Small Business Administration
Understand the options available for you.
Your Funding Strategy
After figuring out startup expenses, you also should figure out how much it will cost to operate the business on a monthly basis for at least the first 1-3 years. This is part of the business plan process that includes financial projections. We go deeper into this in the Entrepreneurial Launchpad class - BUS 218.
For now, figure out how you will access startup funding. Now that you've explored the variety of ways to get funding, which do you think is most reasonable for your business?
Make a chart demonstrating your plan and create a timeline for when you will pursue each avenue.
Example
A retail location has start up expenses of close to $24,000.
The owner has $5,000 of their own money saved and will use this because lenders want to know that you have "skin in the game", meaning you will take a risk as well.
They plan to go to friends and family to ask for another $2,000.
They will then go to a microlender to get the rest of the funds, $17,000.
