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Financing Your Business
Financing Options
Many entrepreneurs need financial resources to start or grow their business. Often times, they must combine what they have with other sources of capital. In the world of financing a business, there are several options:
Many entrepreneurs need financial resources to start or grow their business. Often times, they must combine what they have with other sources of capital. In the world of financing a business, there are several options:
- Debt financing
- Equity financing
- Grants
Debt Financing
Debt financing is the most often used and requires going through lending institutions, friends, family or investors. Many entrepreneurs first think of the Small Business Administration (SBA), which has many loan programs available. It's important to note that the SBA does not finance businesses, the entrepreneur must go through a local lending institution first. It's also important to note the SBA does not offer grants to individual business owners to start or grow a business.
Here's a typical lender's checklist for small business financing:
Debt financing is the most often used and requires going through lending institutions, friends, family or investors. Many entrepreneurs first think of the Small Business Administration (SBA), which has many loan programs available. It's important to note that the SBA does not finance businesses, the entrepreneur must go through a local lending institution first. It's also important to note the SBA does not offer grants to individual business owners to start or grow a business.
Here's a typical lender's checklist for small business financing:
- Business financial statements - to support your application and demonstrate your ability to repay the loan, prepare and include the following financial statements:
- Profit and Loss (P&L) Statement - this must be current within 90 days of your application. Also include the last 3 years if available.
- Projected financial statements - for start-up businesses, include a detailed, one-year projection of income and expenses.
- Company debt schedule
- Business lease - include a copy of the business lease or note from the landlord giving the proposed lease terms
- Business Overview and history - provide a brief history of the business and its challenges. For start-up businesses, include a Business Plan.
- Completed loan application from the financial institution
- Copy of proposed purchase contracts, if applicable
- Income tax returns - include signed personal and business federal income tax returns of your business' principals for previous three years.
- Ownership and affiliations - include a list of names and addresses of any subsidiaries and affiliates
- Personal Financial Statement (PDF)
- Resumes - include personal resumes for each principal
Equity Financing
There are a variety of alternatives to bank financing for small businesses. Entrepreneurs can give up a piece of their company, in exchange for financing or services. Typically, these deals are done with accredited investors. There are several organizations in Oklahoma geared to help entrepreneurs with equity financing deals.
There are a variety of alternatives to bank financing for small businesses. Entrepreneurs can give up a piece of their company, in exchange for financing or services. Typically, these deals are done with accredited investors. There are several organizations in Oklahoma geared to help entrepreneurs with equity financing deals.
- i2E - Innovation to Enterprise - is a private, not for profit corporation focused on growing high-growth companies In Oklahoma and making a positive impact on the state's economy.
- Council Oak Investment Corporation - investment size ranges from $1 million to roughly $10 million in debt or equity for early stage and expansion businesses. The manager for the firm can be reached at 405-218-4696.
- First United Venture Capital Corporation - investment size ranges from $500,000 - $1,000,000 in equity or debt financing for early stage and growth companies. The manager for the firm can be reached at 405-636-4500.
Grants
In the world of for-profit businesses, government grants are typically associated with high tech businesses. There are several federal grant programs available to entrepreneurs and they all revolve around the entrepreneurs ability to solve a government problem. The most utilized government grant programs for small businesses are:
In the world of for-profit businesses, government grants are typically associated with high tech businesses. There are several federal grant programs available to entrepreneurs and they all revolve around the entrepreneurs ability to solve a government problem. The most utilized government grant programs for small businesses are:
- Small Business Innovation Research program - The SBIR Program encourages small businesses to explore their technological potential by reserving a specific percentage of federal research and development funds for small businesses. The program services to fund the critical start up and development stages for a technology and encourages commercialization of the technology, product or service. For more information on this, visit the the SBIR program website.
- Small Business Technology Transfer Program - The STTR program reserves a specific percentage of federal R&D funding for award to small business and nonprofit research institution partners. For more information on this, visit the STTR program website.
- Oklahoma's small technology and manufacturing firms have much to gain from the Oklahoma Center for the Advancement of Science and Technology. OCAST provides both financial support and expertise to help qualifying firms develop their federal proposals for SBIR/STTR and other programs. The program defrays a portion of the proposal preparation costs for qualifying firms, providing up to $3,000 to help offset the costs of developing a federal proposal. OCAST also provides critical bridge funding between Phase I and Phase II of these federal programs, in amounts up to $25,000. In addition to being the designated state agency for the SBIR/STTR programs, OCAST provides funding opportunities through several of their own grant programs.