Notes & updates: None currently.

Sources for Small-Business Financing

Small businesses get money by equity financing or debt financing. In equity financing you sell interest in your company. Debt financing is a loan. You owe the person or entity that holds the debt instrument.
You. Contributing your own money to your business is the quickest way financing. You can use accumulated savings, use a home-equity line of credit, or sell or borrow against a personal asset. You may contribute cash as equity or make a loan to your business.

Family and Friends. Mom, dad, relatives, and friends might be able to access to greater funds than you. They might be agreeable to lending you the cash you need to get the business going, or they might be willing to take an equity stake in your company. If they take an equity interest, you should not have to repay the cash contribution as a loan. You should be able to pay the equity interest in the form of profit distributions.

Banks. Lending institutions make plenty of loans to small businesses. However, banks can be a difficult place for the startup business to find funding because banks like proof that a company has a history of profits. The banks want to be assured that your company will repay the debt. With a good business plan and personal assets to offer as collateral, or backed by a guarantor or cosigner that satisfies the lender, you can qualify for a bank loan even if your business is a startup.

Customers. Customers may be willing to pay you in advance for your products. This would allow you to use their money to fund manufacture of your products or to stock your inventory prior to delivery. Partial advanced payment is a good means of funding a service related business. Asking the customer to pay for the materials and perhaps part of the labor ahead of the work can get you up and running and reduce your reliance on outside financing.

Trade Credit. Vendors and suppliers can be willing to sell to you on credit. Trade credit can be a handy source of financing for startup companies and growing businesses alike.

Small Business Administration. The Small Business Administration (SBA) operates a few loan programs for small businesses. The 7(a) Loan Guaranty Program is one of the main programs. The SBA offers loans to small businesses that are unable to acquire financing on reasonable terms from normal lenders. You may apply for SBA backed loans through local participating lenders.

Leasing Companies. Leasing companies are a way to finance computers, office equipment, phone systems, vehicles, and other equipment. Leasing can lower your startup costs because you shouldn’t have a large cash outlay for the equipment. However, leasing can be an expensive option as the total cost of the equipment will be far above the cost of purchasing it outright.

Small Business Investment Centers. Small Business Investment Centers (SBICs) are licensed and regulated by the SBA. SBICs are privately owned and managed investment firms that invest venture capital and startup financing in small businesses.

Venture Capital Firms. Venture capitalists fund companies that they believe have excellent growth potential. Small businesses are usually unable to obtain financing through venture capital firms.

Investment Banking Firms. Investment bankers turn companies from private, closely held operations to public offerings. The investment banker offers stock in your company to the public. Going public is usually only available to small businesses that have strong growth history and strong growth potential.

Private Placement. A private placement is a stock or debt offer to wealthy individuals or venture capitalists without going public.

Credit Cards. Credit cards are one of the most costly ways to finance your company. Nevertheless, they are regularly used as a source of funds for startup businesses. Credit cards should be a last resort.

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Areas of Representation

We represent clients in the following areas (and around all of Minnesota):