From SBA loans to venture capital, angel investors, IPOs, and government grants — the full spectrum of conventional and unconventional financing.
Conventional Financing
Banks and credit unions — businesses that provide financial services for profit. Conventional financing has the greatest flexibility compared to unconventional sources.
SBA (Small Business Administration)
Created in 1953 as an independent federal agency. An SBA loan is a bank loan — either direct from SBA or (more commonly) guaranteed by SBA. Benefits: lower rates. SBA guarantees up to 90% (up to $155K) and 85% on larger loans.
7(a) Loan Guarantee Program
SBA's standard program. For small businesses needing funds to buy fixed assets or working capital.
8(a) Program
SBA acts as prime contractor, subcontracting with small businesses owned by socially/economically disadvantaged individuals.
Small Loan Program
SBA-guaranteed loans of $50,000 or less. Use SBA Form 4 short form.
Micro Loan Program
Loans of $200 to $15,000 for very small businesses.
CDC Loan Program
Certified Development Company loans for businesses between the cracks of traditional lenders.
98% of U.S. companies qualify as small businesses. Most are eligible for SBA loans up to $750,000. SBA: 1-800-827-5722.
SBIC (Small Business Investment Companies)
Privately organized corporations licensed and regulated by the SBA. Small or emerging businesses can receive equity capital and/or long-term loans. They provide their own capital supplemented by federal funds.
Angel Investors
Affluent individuals who provide capital for business start-ups, usually in exchange for ownership equity. They invest their own funds (unlike VCs who manage pooled money).
Angel capital fills the gap between "friends and family" ($100K-$200K) and venture capital ($1-2M+). Angels seek investments that can return 10x+ within 5 years through a defined exit strategy.
Venture Capital
Private equity capital provided by professional, institutionally-backed investors to new, growth businesses. Made as cash in exchange for shares. High risk, but potential for above-average returns.
VC Due Diligence Process
VCs often take control of the company. Their ultimate goal is to make it very profitable and sell it.
Going Public (IPO)
The process of converting a corporation owned by one or several individuals into one owned by many — through the sale of equity securities (shares of stock).
Example
Issue 10M shares. Keep 3M for yourself. Reserve 3M for future sales. Issue 4M for public sale at ~$1/share. Sell 100K shares = $80K after 20% broker's fee. If stock goes to $5/share, your 3M shares are worth $15M.
You can sell up to $300K in stock without going through the FTC. Many underwriters require: $10-20M annual sales, $1M profit, experienced management, 25%+ annual growth projected for 5 years. NASDAQ listing requires $4M tangible net assets.
IPO Costs
Timeline: 3-12 months (6-9 average when well prepared).
Government Grants
The government gives away billions each year to startups and expanding businesses. Most people never apply because they feel it isn't for them or there's too much red tape. Doing business with the government requires a DUNS number. A grant writer can greatly increase your chances.
Sure-Fire Methods of Raising Instant Cash
Credit Card Cash Advances
Most business owners can write a check for at least $1,000 against credit cards — no questions asked. AmEx allows $2,500. Gold Card up to $5,000. Ten cards = $10,000.
Overdraft Protection
Most bank accounts include automatic overdraft — write a check for more than your balance, the bank covers it. Usually up to $1,000 per account.
Loans Against Life Insurance
Borrow against the cash value. Lower interest than other loans. You don't have to pay it back — just keep interest current. Policy doesn't lose value.
Cash-Out Refinance
If you own real estate with equity and good credit. Not instant — takes 3-4 weeks to close escrow.
Private Stock Sale
100 friends × $1,000 each = $100,000. Or 100 friends × $250 each = $25,000.
How to Raise Capital
There's more money available for new business ventures than there are good business ideas. The task isn't as difficult as most think — especially with a good idea that can make you and your backers rich.
Which financing source will you pursue first? What relationships do you need to build?