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How can I get a grant to start or grow my business?
Grant funding for small business is generally a myth and does not exist to fund private ventures. This is the most common myth, primarily due to the many "services" advertised for a fee that will help you find a grant. However, the U.S. Government does not have "billions" of dollars available to help individuals start/grow businesses. The U.S. Government does not offer grant funds directly to small businesses, regardless of gender, race, or any other group.
What types of grants do exist?
The U.S. Small Business Administration does distribute federal grant money to non-profit organizations to assist small businesses achieve success. It is possible that a federal grant will be available to a private company in order to develop a particular industry (such as environmental technology, for example) and it is possible for an individual or a non-profit organization to offer some type of grant funding. However, such opportunities are not common. Please research carefully before spending money to find grant opportunities. Use resources such as the WBCC to assist you in determining if such an opportunity is legitimate.
Can the WBCC help find grants, give grants, or lend money?
NO, the WBCC does not have a grant program and is not a lender. We do not help find grants either because such opportunities are extremely rare if they exist at all. What we can do is help prepare you to become a good candidate for a small business loan, and assist you with that process. We also have a small cash award competition as part of our annual awards luncheon, see details under "Services & Events" "Annual Expo." Competition opens around June - July each year, awards presented at the event which takes place in Sep - Oct.
How to qualify to receive financing for a start-up business?
There are no rules set in stone when it comes to lending, however, there are some generalities to follow. There are a variety of lending programs available, and it is not impossible to get loans for start-ups. The best approach will vary by individual case. The main thing to remember is that lenders are risking their funds on your business, so the best chance you have in terms of receiving funding is preparing in advance in order to demonstrate that you will be able to repay the loan.
How to prepare for financing a start-up?
Entrepreneurs should not rely on a business loan until they have researched the likeliness that one will be received. It is important to use community resources such as the WBCC, talk to lenders and research all of your options before the time comes. It is generally the rule of thumb that before starting a business one should have the equivalent of 6 months current salary plus benefits of their own money on hand and available.
When to start the loan process?
It is easier to get money when you don't need it rather than when you do need it! Did you know that you could take out a loan or line of credit and NOT use it, and therefore NOT pay interest on it. That way, you have it available should you need it. When you hit a rough patch, when your cash flow is low, when your outstanding debt and revolving credit is high, it is extremely challenging to receive a loan. Get it when you don't need it so you have it when you do need it!
What makes a good loan candidate?
A good credit score. Do you know yours? If not, find out now.
MYTH BUSTER: Checking your own credit score does not lower your credit score. When lenders check your score over and over again, that does negatively impact your score.
* That is why it is imperative that you know your score, and make sure potential lenders know it as well before you apply. Lenders will check, and they will find out your score, if you let them know your score upfront, they will give you honest feedback on your chances of receiving financing with their institution. That way you know the likeliness, and then can apply or not apply officially. This will help you avoid having too many inquiries which will further lower your score.
* There are some loan programs that are 100% based on credit scores, for example, with a good credit score you can get a small business loan for approximately $35,000 without any other application and without a business plan.
* There are other programs that allow some leeway in this area, make sure you are working with the right lender and the right loan program for your personal situation.
GENERAL RULE OF THUMB: increase your credit score as much as you can before applying, then make sure you are applying with lenders and for programs that allow some leeway and explanation.
Collateral - having something to back up the loan that you own is helpful
MYTH BUSTER: Equipment is considered collateral, but it is not the best collateral source as items in this category tend to depreciate at a high rate rather than appreciate.
* Real estate is also collateral, but remember, equity is not real money and can fluctuate tremendously. The larger the portion
of unused equity you have, the better your chances. Investment properties make better collateral, as lenders do not really want
to take one's home that is a primary residence due to non-repayment.
* Cash is King - liquid collateral is the best, such as, CD's, savings, retirement plans.
GENERAL RULE OF THUMB: The best collateral is that which will not devastate your life, that typically appreciates rather than
depreciates, and those which are secure and easy to liquidate.
Personal Investment, Other Income, Savings and Start-Ups
MYTH BUSTER: Lenders will 100% finance your business from the start at a high rate.
* A lender is more apt to invest in you if you have invested in yourself. If you are willing to risk YOUR money, they are more likely
to risk THEIR money.
* Lenders know that you will pay your rent, mortgage, buy food and other necessities BEFORE you will pay them; therefore, demonstrating savings and/or other sources of income to cover such necessities ensures lenders a better chance of repayment should your business not generate the expected income in the short-run.
* It is rare that start-ups are funded at a high level. Even with a great business plan, a history is important.
GENERAL RULE OF THUMB: Save money as much as possible, invest your own money in your business in the early stages, and make sure you have a back up plan to get through the first 6 months of business, at the very least, fully covering your basic necessities.
Business Plans
MYTH BUSTER: I don't need a business plan for my type of business.
* Yes, you do. It is your job to convince lenders that you are a good candidate, and a well-written business plan is the method of
choice in which to demonstrate that.
GENERAL RULE OF THUMB: Business plans should contain the facts that prove you have a good business idea and you can
make a go of the business. The main factor in qualifying for a loan is simply your ability to pay it back, to pay it back, you must
have a sound plan for the business.
For business plan guides, click on the "Online Resources" tab above and "Links and Downloads" on the left navigation bar.
