The City of Cape Coral supports the goal of attracting different types of businesses in order to strengthen our local economy, balance the tax base, and continue to improve the quality of life for our residents and visitors. We also encourage our existing businesses to grow and create additional jobs for today’s workforce and future generations. Federal small business loans and business startup grants are available for business start-ups, as well as expansions and relocations.
Typically, banks are reluctant to offer small business startup loans. However, for over half of today’s established small businesses, commercial lenders are the preferred source of long-term small business financing.
Small business owners often cite their bank as their most important partner in financial success, second only to their accountant. Small business owners are well advised to know their banker and encourage their banker to learn about their business, even before there is a need for funds. Invite your banker to visit the company, give them a tour of your operations; and share with them your business plan. Bankers are more likely to offer funding for a small business to companies they know, and with whom they have a track record. This may be especially important for small businesses that do not have a long credit history or are in an unusual business field that cannot easily be evaluated using traditional lending criteria.
Another small business financing option is with a venture capitalist. This is different from borrowing from a lender. Instead of earning interest, the venture partner typically acquires a level of business ownership. The share of ownership may be substantial. Venture capital organizations consist of a variety of investors, such as individuals, partnerships and investment companies seeking to invest in fast growing small businesses and start-ups with excellent growth potential.
Venture capitalists expect two things when they invest: much higher returns than would be expected on a traditional business loan; an influence in how the company is managed. One advantage of venture financing is that this infusion of capital does not typically have to be repaid.
Leasing is a fast-growing method of financing capital equipment. Under a lease agreement, a business can acquire immediate use of equipment without tying up capital. Leasing can be an attractive option for obtaining technology equipment, which becomes obsolete quickly. Since leasing can be more expensive than buying equipment outright it should be researched carefully.
Personal or business credit cards issued by a bank or other financial institution can be used for small business financing in order to buy office supplies, computers, and other necessities for start-up costs, but the interest rates tend to be higher. Personal credit card debt should be considered a short-term loan to be paid back by the business, just as if the loan had come from a bank.
Equity Loans and Personal Funds
A common source of funding for small business startups is a home equity loan. Other options are personal funds from savings, trust accounts, or some form of personal equity of the business owner or owners. These are the easiest and least expensive methods of small business financing. The limitations are the amount of capital available and the willingness to put it at risk.
Personal funds also play a significant role in seeking other forms of business financing options. Just as a bank will usually not finance 100% for a new home purchase, bankers expect business borrowers to pledge their own funds to cover a portion of the financed purchase. Banks require this for two reasons: it limits the bank’s exposure in the event of default, and it demonstrates the borrower's good faith and commitment to success of the business.
The most prevalent type of small business financing is commercial credit. Commercial credit involves vendors delivering goods or performing services before payment is received. In many industries, buyers have up to 30 days after billing to pay for goods or services before the payment is considered past due, allowing businesses flexibility in managing cash flow.
Small Business Loans & Business Startup Grants
Federal, state and local governments offer a wide range of startup business funding programs to help small businesses start and grow their operations. These programs include low-interest loans, venture capital, and scientific and economic development grants.
Use the Loans and Grants Search Tool on the federal government’s website http://business.usa.gov/ to get a list of small business and startup business financing programs for which you may qualify, or visit the resources below to learn more about small business and startup business funding programs.
Use the following resources to find information about business financing options:
Government Business Startup Grants
Learn the truth about getting free money from the government.
Seed and Venture Capital
How to get money for high tech start-ups.
Learn about revenue bond financing opportunities for small manufacturers and nonprofits.
|SBA Finance Programs
Small Business Administration Loans (SBA)
The Small Business Administration will not guarantee long-term loans without a written, formal business plan and expects business borrowers to pledge their own funds to cover a portion of the financed purchase.
Small Business Administration
|SBA Finance Programs
SBA - Low Doc Loan Program