Start-Up Financing Options

March 12, 2017


Short-Term Financing Sources

  • Overdraft protection
  • Letter of credit
  • Short-term loan

Long-Term Financing Sources

  • Long-term loans
  • Leasing
  • Short-term loan

Long-Term Financing Considerations

  • May be required to post collateral

Loan Sources

  • Traditional banks

Loan Considerations

  • Must be “credit ready”
  • Often a lengthy and time-consuming process
  • Considerable financing costs

Microloan Sources

  • SBA

Microloan Considerations

  • Provided to help small businesses & not-for-profits
  • Can be used for working capital, inventory, furniture & equipment
  • Cannot be used to pay debts or to acquire real estate
  • Maximum 6 year payback period

Credit Card Sources

  • Banks
  • Credit Unions
  • Financial Institutions

Credit Card Considerations

  • Easy access to small funds for an urgent need
  • Source of working capital
  • Purchase necessary equipment

Export Loan Sources

  • SBA Export Loan Programs
  • SBA Export Working Capital Loan
  • SBA International Trade Loan Program


Savings Considerations

  • Life-savings may be at risk

Retirement Sources

  • Rollovers as Business Startup (ROBS) program – 401(k)
  • Plan becomes part owner of the business

Retirement Considerations

  • Business may be required to incorporate
  • Rollover may be tax-free
  • Does not require a credit history
  • Life savings may be at risk

Investment Sources

  • Stock investments
  • Real estate investments
  • Other investments

Investment Considerations

  • Consider lost income from investment
  • Consider costs (including tax costs) of liquidating investment

Reverse Mortgages and Home Equity Loan Sources

  • Equity in business owner’s house may be used to finance a small business

Reverse Mortgages and Home Equity Loan Considerations

  • Business owner must be above 62 to qualify for reverse mortgage
  • Loan is repaid only in case of owner’s death or if house is sold
  • Equity in house is lost if business fails

Family and Friends Considerations

  • Viable and easy sourc of financing
  • Quicker access to funds
  • Potential for family squabbles


Crowd Funding Sources

  • Collective cooperation of people who network and pool their money and resources together

Crowd Funding Considerations

  • Creates community awareness and publicity for business venture
  • Time involved in financing is minimal
  • Increased pressure to make profits

Grant Sources

  • SBA

Grant Considerations

  • Grants do not have to be paid back