Launch - Summer 2008 - (Page 31)

Bank Loans Signature loans and bank lines of credit are good ways to get quick cash, but they are hard to qualify for if you don’t have collateral or haven’t been in business for at least two years. Venture Debt There are different flavors of venture debt out there, but at its core, venture debt is a loan for young companies that can’t qualify for a bank line of credit. In addition to repaying the loan with interest, you may need to give up a small part of your company’s equity but it’s generally less than 5 percent. You may also have to sign a personal guarantee on the loan. For many growing companies, it’s cheap money since there’s not much equity given away. Silicon Valley Bank (SVB) first launched the idea. Comerica and SVB are two active classic venture debt lenders that will fund Utah companies. Locally, Zions Bank recently began doing some venture debt funding and InnoVentures (formerly UTFC) has been funding startups using its own version of venture debt for years. SBA Loans months without a regular paycheck? If you can, you’ll greatly increase the chance of surviving the first few years. Making payroll every two weeks is a cash-flow killer. Seller Financing If you’re buying an existing business, you may be able to get the seller to finance part of the purchase price over time structuring the deal like a bank loan. Grants If you spend enough time looking, odds are you will be able to find a local or federal grant related to your industry. The hardest part of getting a grant is often figuring out where to start since finding the right grant is truly the proverbial needle in a haystack. Be cautious of companies who offer grant-finding services. Some are legitimate, but many are scams. Factoring Small Business Administration loans are great, but often to qualify you need to be in business for two years and/or come up with collateral. For many, that means putting their house on the line. Leasing/Financing If your startup requires a substantial amount of equipment, you may be able to lease or finance the gear instead of purchasing it, thus freeing up money garnered from other funding sources for various other uses. Credit Cards Many a business has been started on $50,000 in credit card debt spread out over 10 different cards. Make sure to constantly monitor interest rates and make payments on time or you can quickly get in trouble. Home Equity Loan Factoring is the process of selling part of your account receivables at a discount to a third party (called the factor). The factor buys a percentage of your unpaid invoices then collects money directly from your customers. Factoring isn’t a loan, it’s the outright selling of assets so your credit score isn’t an issue. Factoring is a quick way to raise money if you can’t get some kind of a loan. You take a pretty big hit on the discount given to the factor but at least you don’t have to wait 30, 60 or 90 days to collect on your invoices. Of course, you need to actually have a business up and running with real account receivables before you can take advantage of factoring. Micro Loans Although it can put your house at risk, home equity loans are one of the most popular methods of financing a startup. Sweat Equity A local nonprofit organization, the Utah Microenterprise Loan Fund (UMLF) has helped hundreds of Utah startups with loans ranging from $1,000 to $25,000. UMLF is more flexible than the SBA or a bank when considering credit score and collateral. Visit umlf.com for information. $ Click here for the HTML version of this article on launchutah.com. summer 08 launch 31 Every entrepreneur puts in a lot of hours, but can you and a few key employees afford to go the first 12 or 18 http://umlf.com http://www.launchutah.com/article-feature3-q22008.php

Table of Contents Feed for the Digital Edition of Launch - Summer 2008

Launch - Summer 2008 Contents Editor's Note Dashboard Marketing Column Funding Column Sales Column Risks vs. Rewards Myths of Entrepreneurship Opportunities vs. Ideas Funding Options for Startups Making Sense of Term Sheets

Launch - Summer 2008

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