Your business plan is an important gateway into the funding market. Most funding agencies, including potential government partners, are going to be interested in the various financial aspects of your proposed business, you and your business partners. There are five “C”s of financing to be aware of:
|Capacity||A borrower’s ability to repay is the most important factor in the lending world. Lenders will want to know how you are going to repay a loan. There is no better indicator of future performance than past performance, and elements like your credit score and how existing debts are paid are very important considerations.|
|Capital||Lenders will also want to see the level of commitment you have in this business venture. All business ventures involve risk and if you have not taken on risk, can you expect them to be willing to accept risk on your behalf?|
|Collateral||Collateral and guarantees help reduce the risk that lenders assume when they lend you money. Collateral involves the use of an existing asset to secure the loan, while a guarantee involves a third-party promissory commitment.|
|Conditions||How will the money be used? Lenders need to know that money is going into the business, rather than to offset personal obligations of the business owner.|
|Character||Many lenders can sense the seriousness of the business venture. Do you have what it takes to run the business? What background do you have in the industry? Do your references provide insight into your business acumen?|
For many start-ups, cooperation among lenders is the key. Many new businesses need to piece together a patchwork of funding to satisfy their financing. Banks, alternative lenders, government programs, family and friends often become partners to assist in the development of business.
If you encounter resistance in obtaining financing, review your business plan and strengthen areas of concern identified by potential lenders.
What if you do not qualify for traditional financing through a bank?
There are several “alternative lenders,” listed below. These lenders often have more flexibility than banks. Once your business is established and proven, a banking institution is more likely to favorably consider the request. In general, banks have stricter guidelines on risk than alternative lenders. However, banks are better suited to grow along with your business, and their many valuable services and products could ultimately present your venture with more choices and greater flexibility.
Financing your start-up or expansion should be considered as you begin your planning.
It makes no sense to think of planning and financing separately. Financing can take an unexpected amount of time, so identifying key issues of your plan is wise.
The federal government does not give money away to businesses. There are several programs available for businesses, but these programs require commitment, Business Plans, and a project that fits into the program requirements of the particular program.
Local Banks and Lenders
Charter Oak Federal Credit Union | charteroak.org
Chelsea Groton |chelseagroton.com
Dime Bank | dime-bank.com
Eastern Savings | eastern-savings.com
People’s United | peoples.com
Putnam Savings | putnambank.com
Savings Institute | savingsinstitute.com
Norwich Community Development Corporation | askncdc.com
Connecticut Community Investment Corporation (CIC) | ctcic.org
Community Economic Development Fund (CEDF) | cedf.com
Southeastern Connecticut Enterprise Region (seCTer) | secter.org
860.437.4659 Extension 204