Funding a Small Business

Small business funding is very limited. Because the government uses taxpayer dollars to provide capital to businesses, these funds are typically set aside for nonprofit organizations, academic institutions, medical facilities and research and technology development organizations. Corporations are usually trying to fund mid-sized to large corporations that are more profitable. With all of this in mind, where do small businesses fit in, as far as capital is concerned?

There are just a few programs at the corporate, community development, state and local levels in different regions of the country, that provide grant and loan funding for the small business owner. Do keep in mind, however, that the funds of these local agencies are very scarce due to the downturn in the U.S. economy. As a result agencies are even more stringent in their funding guidelines, and the application process is more competitive, considering the limited resources they now have.

Funding through College Business Development Centers

Grants from colleges are usually in the $5,000 range, due to their limited funding. Since these institutions are academic in nature, they also provide a large degree of training for small business owners on various topics. Courses can include anything from business plan development, financial statement preparation, choosing a board of directors, marketing, government contracting and more. Some even provide annual conferences to help you network and grow your business. They also allow small businesses to become vendors at their annual events. You can search with local colleges in your area to find out if they house one of these centers.

Funding through Local Community Economic Development Corporations

Micro grants from community organizations are usually $10,000, and typically have a matching requirement. This means that if you are awarded $10,000, then you must come up with an additional $10,000 to operate your business. You must have banking documentation to prove the availability of these funds as well. Your proposal must outline how you plan to spend the money. It cannot be spent to pay off debts. You must spend the funds on economic development activity, such as, web site development, marketing, new ad campaigns, financial management system upgrade, etc. You can search for these organizations through your local municipal offices, political organizations and chambers of commerce.

Funding through Community Development Banks

Community Development banks typically give up to $100,000 to small businesses in loan funding, if they qualify. Since most community banks receive funding support for small businesses from the federal government, they tend to have a larger budget. Applying for this kind of funding, however, is not the simplest task. A loan package has to be prepared and submitted to apply for these funds. The package includes a business plan, 5-Year Business Financial Forecast, Company Balance Sheet, 1 – Year Profit and Loss Statement, personal financial statements, credit history, loan application and cover letter. This documentation could easily be 20 – 50 pages or more. You can search for these organizations through the Small Business Administration (