Finding
money
There are many sources
for money. Some are better options for certain businesses than others.
Consider each source for its relative appropriateness and how likely
you are to get money from it. The key to successful financing lies
in finding the right mix of financial sources.
Friends and Family
Money
from friends and family is sometimes referred to as "love money."
This can be an excellent source, but it has a down side. Friends and
family who do not understand the process of building a business may
expect too much too quickly. They may suddenly want you to pay them
back without notice. If you do get a loan or investment from a friend
or family member, put your agreement in writing and treat it professionally.
Commercial banks
Commercial
banks are in the money business. They make money by lending money.
Before you ask a bank for a loan, get to know a loan officer. Discuss
your idea, share information, do your personal banking at the bank
before you present your business plan and request a loan.
Check out several banks.
Meet the commercial loan officer and ask about the bank's philosophy.
Will they take the time to get to know your business? Will the loan
officer give you periodic financial advice if you need it? Remember,
you are the bank's customer.
If you don't feel comfortable
with one banker, try another. If you live in a rural community where
there is only one bank and things don't work out, try a bank in a
nearby community. Expect it to take time to work out a financing arrangement.
Credit Unions
Some
large companies, unions and trade organizations have a credit union.
Some individuals who go into a business either on a part time or spare
time basis can finance their business through a loan from their credit
union.
Farmers Home Administration
(FmHA)
The
FmHA guarantees loans for businesses located in rural areas. The borrower
must show how the new or expanded business will benefit the community.
Small Business Administration
(SBA)
The
Small Business Administration is a government entity that was created
to encourage, assist and protect the interests of small businesses.
A small business is defined by the SBA as one that is:
- is independently owned
and operated
- is operated for a profit
- is not dominant in its
field
- meets specific size
criteria based on the type of business
- Manufacturing: maximum
number of employees may range from 500 to 1,500, depending on
the type of product manufactured.
- Wholesaling: maximum
number of employees may not exceed 100.
- Services: average
annual receipts (revenues) may not exceed $3.5 to $13.5 million,
depending on the industry.
- Retailing: average
annual receipts may not exceed $3.5 to $13.5 million, depending
on the industry.
- Construction: general
construction average annual receipts may not exceed $9.5 to
$17 million, depending on the industry.
- Special trade construction:
average annual receipts may not exceed $7 million.
- Agriculture: average
annual receipts range from $1 to $3.5 million, depending on
the industry.
Most SBA programs are loans
guaranteed to a commercial lender. This means you must apply for a
loan through a commercial lender first. If the lender is unable or
unwilling to provide the financing directly, encourage the lender
to contact the nearest SBA office. To be eligible, your business must
fall within the standards set by SBA.
Depending on available
funds, some businesses are eligible for an SBA direct loan. For further
information on SBA financing programs, contact your local lender or:
The U.S. Small
Business Administration
PO Box 3086
Fargo, ND 58108
701-239-5131
The Bank of North Dakota
The
Bank of North Dakota has lending programs for North Dakota businesses
through their communities or banks.
Partnership in Assisting
Community Expansion (PACE). PACE is a loan program initiated to assist
North Dakota communities in expanding their economic base and provide
for new job development. The program is available to communities across
the state for specific kinds of businesses.
Micro Business Loans and
Tourism and Recreation Investment Program (TRIP) Loans. These two
lending programs are designed to benefit tourism and small businesses.
Both are available only through a lead lender. A lead lender is a
qualified financial institution which puts together the loan package
and will request the Bank of North Dakota's participation in the loan.
Small Business Loan Program
and Business Development Loan Program. These programs are for business
capital, equipment and property purchases. As with the other programs,
these also require a local lender.
These and other business
development and loan funds through the Bank of North Dakota vary in
requirements and criteria. For more information contact your local
lender, or:
The Bank of North
Dakota
700 E. Main Avenue
Bismarck, ND 58501
1-800-472-2166
The MicroLoan Program
The
MicroLoan Program is designed to assist start-up, newly-established,
and growing small businesses in the state of North Dakota. The program
is sponsored by the U.S. Small Business Administration and is funded
and administered statewide by the Lake Agassiz Regional Council. For
more information contact the Regional Council responsible for the
county you reside in:
- Region I
Tri-County Economic Development Association
PO Box 1326/UND
Williston, ND 58801
572-1751
- Region II
Souris Basin Planning Council
2001 8th Ave. SE
Minot, ND 58701
- Region III
North Central Planning Council
PO Box 651
Devils Lake, ND 58301
- Region IV
Red River Regional Planning Council
1004 Hill Ave.
Grafton, ND
352-3550
- Region V
Lake Agassiz Regional Council
417 Main Ave.
Fargo, ND 58103
239-5373
- Region VI
South Central Dakota Regional Council
PO Box 903
Jamestown, ND 58401
252-8060
- Region VII
Lewis & Clark Regional Planning Council
400 East Broadway, Suite 418
Bismarck, ND 58501
255-4591
- Region VIII
Roosevelt-Custer Regional Council
Pulver Hall
Dickinson, ND 58601
277-1241
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