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Ten Ways to Fund Your Business

Ten Ways to Fund Your Business

Making the decision to start your own business can be both exciting and daunting. There are many things to think about: picking a business name, choosing a business structure, getting the required licenses and permits, and creating a business plan. You will also need to figure out how to fund your business, since most people don’t have the money to finance it themselves. So, a Business Lawyer would suggest these ways, but keep in mind, if you are going to ask friends and family for money to start a business, you need to provide disclosures and have your paperwork done by a Utah securities lawyer or you could run afoul of civil and criminal law in Utah.

Others may have enough money, but don’t want to have their life savings wrapped up in a business when there are no guarantees that it will succeed. This article provides a list and brief description of ten suggestions for how to fund your business.

  1. The U.S. Small Business Administration (SBA) has four basic loan programs:
    a. 7(a) Loan Program: this is the SBA’s most common program. The eligibility requirements vary depending on the specific aspects of the business.
    b. Certified Development Company/504 Loan Program: this program has specific eligibility requirements and provides financing for major fixed assets such as real estate or equipment.

    c. Disaster Loans: these low-interest loans can be used to replace or repair various items that have been destroyed or damaged in a disaster.
    d. Microloan Program: The SBA’s microloan program assists certain intermediary lenders in making loans to small businesses and certain not-for-profit childcare centers. This program provides loans of up to $50,000.

  2. United States Department of Agriculture (USDA) Rural Development: The Rural Development division provides loan guarantees for the purchase and expansion of land, buildings, equipment and working capital for cooperatives, nurseries, tourist and recreational facilities, hotels, motels, community projects, housing development sites and apartment buildings. These loan guarantees are provided only to businesses that save or create jobs in rural areas.
  3. State Financing Programs: Although state financing programs vary widely from state to state, all states offer financing programs. Funds originate from the federally-funded Small Cities Development Program and from state investment fund appropriations. Contact your state’s department of trade and economic development to find out what’s available.
  4. Local Financing Programs: Various governmental units provide forms of financing assistance to small businesses. The assistance may be in the form of the planning or business services unit of the county or municipality in which you operate (or intend to operate) your business.
  5. Commercial Banks and Savings and Loan Associations: If you can demonstrate a sound business plan and an operating history of two to three years, you may be able to obtain a loan from a commercial bank with favorable terms. Loans may take the form of lines of credit, inventory loans, accounts receivable financing, factoring (where the lender purchases receivables for a percentage of their face value), and conventional loans repaid over time. For newer businesses, a personal guarantee of the owner of the business will most likely be required. Savings and loan associations can also provide you with a business loan if you have appropriate collateral.
  6. Credit Unions: If you belong to a credit union, you may be able to borrow funds for your business. The procedure is generally simpler than borrowing funds from a commercial bank.
  7. Mortgage Companies: Some mortgage companies allow people to establish lines of credit on the equity they have in their homes, which can then be used to finance a business venture. Please be aware, however, that by doing this, you are putting your home at risk.
  8. Credit Card Companies: Although risky and costly, using credit cards to finance a business venture, particularly in the short-term, can be effective.
  9. Friends and Relatives: You may be able to obtain some funds from friends and relatives. However, it is important to pay back these loans on time to avoid making friends into enemies and relatives into estranged relatives.
  10. Life Insurance Policies: You can often borrow most of a life insurance policy’s cash surrender value for your business. However, make sure you understand the terms of the insurance plan first to avoid voiding the policy or reducing the death benefits.

These are just some of the loan programs available for those looking to finance their business. Be sure to check the loan programs in your area before committing to a particular loan program on this list. And remember, while this list is helpful in providing basic information about various loan options, only you can know which type of loan will best fit your needs.

Free Consultation with a Utah Business Lawyer

If you are here, you probably have a business law issue you need help with, call Ascent Law for your free business law consultation (801) 676-5506. We want to help you.

Michael R. Anderson, JD

Ascent Law LLC
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States

Telephone: (801) 676-5506

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Michael Anderson

About the Author

People who want a lot of Bull go to a Butcher. People who want results navigating a complex legal field go to a Lawyer that they can trust. That’s where I come in. I am Michael Anderson, an Attorney in the Salt Lake area focusing on the needs of the Average Joe wanting a better life for him and his family. I’m the Lawyer you can trust. I grew up in Utah and love it here. I am a Father to three, a Husband to one, and an Entrepreneur. I understand the feelings of joy each of those roles bring, and I understand the feeling of disappointment, fear, and regret when things go wrong. I attended the University of Utah where I received a B.A. degree in 2010 and a J.D. in 2014. I have focused my practice in Wills, Trusts, Real Estate, and Business Law. I love the thrill of helping clients secure their future, leaving a real legacy to their children. Unfortunately when problems arise with families. I also practice Family Law, with a focus on keeping relationships between the soon to be Ex’s civil for the benefit of their children and allowing both to walk away quickly with their heads held high. Before you worry too much about losing everything that you have worked for, before you permit yourself to be bullied by your soon to be ex, before you shed one more tear in silence, call me. I’m the Lawyer you can trust.