|Page updated/verified: Oct 25, 2013
Financing Your Business
Prior to approaching any person or organization for financing, a business
plan and financials should be in place. This is true even when approaching
family and friends for financial assistance. The financial statements
generally include actual or projected balance sheets, profit and loss
statements, cash flow projections, break-even analysis, sources and uses of
funding, tax returns, schedule of existing indebtedness and, if a
privately-held company, personal financial statements of principals.
Financing for start-up businesses comes primarily through
personal loans. Your local financial institutions (commercial banks, savings
and loans) can talk to you about options you may have at your disposal. This
may include personal funds, loans from private investors (family, friends,
business associates and suppliers), home equity loans, refinancing of real
estate, credit card lines of credit (American Express Corporate Card, VISA,
MasterCard), cash value on life insurance policies and co-signing
The 5 C's of credit
One of the most common questions among small
business owners seeking financing: "What will the bank be looking for from
me and my business?" While each lending situation is unique, many banks
utilize some variation of evaluating the five C's of credit when making
credit decisions: character, capacity, capital, conditions and collateral.
We'll take a look at each of these ingredients and how they may impact your
funding request. Review each category on the link above and see how you
About SBA Guarantees
The Small Business Administration (SBA)
may be an additional source of financing through their Low Documentation
Program and 7(a) Bank Loan Guarantee Program. The Low Documentation Program
is a quick and easy lending program for small business loans of no more than
$150,000. SBA guarantees up to 90% of the loan. The 7(a) program provides
loan guarantees to small businesses for working capital or fixed asset
Revolving Loan Funds
Revolving Loan Funds (RFLs) are available
in many areas throughout the state. Each fund has its own policies and
Check with Local Economic Development Agency
economic development agency can assist you in determining financial
resources in your area.
SBA Community Express Loan Program
Express is a pilot SBA loan program that offers up to $350,000 in loan
proceeds for agricultural and farm businesses.
Farm Service Agency Loans
Stabilizing farm income, helping
farmers conserve land and water resources, providing credit to new or
disadvantaged farmers and ranchers, and helping farm operations recover from
the effects of disaster are the missions of the U.S. Department of
Agriculture's Farm Service Agency (FSA).
Farm Service Agency Loans Resources
It is important to
understand the difference between debt and equity financing. This
Website gives a good explanation of how they each work and things you want
ShoreBank Pacific is a Washington-chartered bank that provides
deposits, loans and consulting services to help businesses grow and become
more environmentally sustainable.
Rural Loan Fund
Evergreen Community Development has
developed a revolving loan fund for businesses in rural communities between
$10,000 and $250,000 for equipment, real estate, leasehold improvements,
inventory, working capital, and refinancing.
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When you are seeking financing for your business it is to your best
advantage to apply for a loan from a conventional bank. If for any
reason you are not able to get conventional financing, your next step is
to seek either investors or alternative financing. Alternative lenders
may guarantee loans or have more flexibility in their requirements. The
following links may get you started in your search for alternative
Farm Service Agency Loan Programs
FSA makes direct and
guaranteed farm ownership (FO) and operating loans (OL) to family-size
farmers and ranchers who cannot obtain commercial credit from a bank, Farm
Credit System institution, or other lender. FSA loans can be used to
purchase land, livestock, equipment, feed, seed, and supplies.
Farm Credit Services Loans
Credit Services is a cooperatively owned agricultural lender specializing in
financing to farmers, ranchers, agribusinesses, commercial fishermen, timber
producers, and country home owners in Idaho, Montana, Oregon, Washington,
and Alaska. Farm Credit offers a broad range of flexible loan programs and
specially tailored financial services to the agricultural, timber and
fishing industries and rural areas. Short-, intermediate- and long-term
financing at variable-, fixed- and adjustable-interest rates is available.
Farm Credit also provides leasing services, appraisal services, and life,
mortgage, disability, and crop insurance programs.
Ag Vision: Loans for Young, Beginning, Small or
AgVision is designed to meet the needs of
customers with at least one of the following characteristics:
35 years of age or younger
Less than 10 years agricultural experience
Recognized minority: African American, Native
American, Alaskan Native, Hispanic, Asian, and Pacific Islanders.
Producer with farm production les than $250,000
Northwest Farm Credit Services -An Agricultural Lender
Northwest Farm Credit Services is a
cooperatively owned agricultural lender specializing in financing to
farmers, ranchers, agribusinesses, commercial fishermen, timber producers,
and country home owners in Idaho, Montana, Oregon, Washington, and Alaska.
ShoreBank Enterprise Cascadia
ShoreBank Enterprise Cascadia, a nonprofit,
provides financing and business assistance to underserved entrepreneurs,
small businesses, and community-building organizations.
USDA Rural Development
USDA Rural Development works
in partnership with the private sector and the community-based organizations
to help fund businesses that create or preserve quality jobs and/or promote
a clean rural environment. The financial resources of USDA Rural Development
are often leveraged with those of other public and private credit source
lenders to meet business and credit needs in under-served areas.
Recipients of these programs may include individuals, corporations,
partnerships, cooperatives, public bodies, nonprofit corporations, Indian
tribes, and private companies.
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Equity financing requires that you sell an ownership interest in the
business in exchange for capital. The most basic hurdle to equity financing
is finding investors who are willing to buy into your business; however, the
amount of equity financing that you undertake may depend more upon your
willingness to share management control than upon the investor appeal of the
business. By selling equity interests in your business, you sacrifice some
of your autonomy and management rights.
Most small or growth-stage businesses use equity financing in a limited
way. As with debt financing, most of the time additional equity comes
from non-professional investors such as friends, relatives, employees,
customers or industry colleagues.
Understanding Equity Capital
This website is an
explanation from the SBA on the difference between equity and debt financing
and a definition of angel investors and venture capital.
New Markets Venture Capital
The New Markets Venture
Capital ("NMVC") Program is a developmental venture capital program designed
to promote economic development and the creation of wealth and job
opportunities in low-income geographic areas and among individuals living in
such areas. This website offers a slideshow presentation and links to
How to Raise Money for Your Business
you get your head around the different ways you can finance the growth of
your business, entrepreneur.com has compiled mini-guides that cover the
basic information on 19 different financing sources. Read through the guides
to learn the basics, and then start hunting!
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Most business owners are curious about grants because it is free money
from the government. The reality is that government grants mostly serve
the purpose of the government agency offering the grant which usually
has to do with research or scientific purposes. If you do qualify or
are interested in a grant you will have to learn how to apply and
compete for the grant. You will also have to plan ahead because most
grant processes may take more than a year for funding from the time that
you are awarded the grant. The following links will give you more
information about well known agricultural based grants.
USDA Value Added Producers Grant
The program was created with
two primary objectives. The first is to encourage independent producers of
agricultural commodities to further refine these products increasing their
value to end users. The second objective is to establish an Information
resource center to collect, disseminate, coordinate, and provide information
on value-added processing to independent producers and processors.
Value Added Producers Grant Resources
Community Food Projects Competitive Grants Program
Community Food Projects are designed to increase food security in
communities by bringing the whole food system together to assess strengths,
establish linkages, and create systems that improve the self-reliance of
community members over their food needs.
Sustainable Agriculture Research and Education Program
Sustainable Agriculture Research and
Education is a program of the U.S. Department of Agriculture that functions
through competitive grants conducted cooperatively by farmers, ranchers,
researchers and ag professionals to advance farm and ranch systems that are
profitable, environmentally sound and good for communities.
Rural Business Opportunity Grant
To be eligible
for an RBOG, applicants must be a public body, nonprofit corporation,
Indian tribe, or cooperative with members that are primarily rural
USDA Rural Development Business Grants
USDA Rural Development
offers a variety of grant programs that facilitate the development of small
and emerging private business enterprises, promote sustainable economic
development and job creation projects in rural communities with the most
need. This site has links to several grant programs
Notices of Funding Availability
Notices of Funding Availability (NOFA) published in the Federal Register
are summarized daily at this site.
NRCS Farm and Ranch Lands Protection Program
The Farm and Ranch
Lands Protection Program helps farmers and ranchers keep their land in
agriculture by providing funds to purchase conservation easements.
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USDA Rural Development
The Rural Housing Service helps rural
communities and individuals by providing loans and grants for housing and
community facilities. They provide funding for single family homes,
apartments for low-income persons or the elderly, housing for farm laborers,
childcare centers, fire and police stations, hospitals, libraries, nursing
homes, schools, and much more.
Housing Programs, grants and loan programs
Business & Cooperative programs
Understanding Your Financial Statements
financial statements is critically important to the success of a small
business. This SBA website provides a good overview of the basic
financial statements and links to templates that you can use.
SBA Loan Checklist
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