![Kentucky Small Business Development Center [Return Home]](http://www.ksbdc.org/wp-content/themes/ksbdc/images/logo.jpg){kind=logo}
Financing
- I am looking at starting a new business. What types of grants are available?
- What do I need to do to get a loan?
- Does the SBDC offer loans?
- What alternatives are there to financing a business?
- When do businesses generally start returning revenue?
- Who do I contact to receive a loan from the Veteran’s Administration?
- Is my credit score important in securing a loan?
- What kind of financing is available when your credit rating is bad or you have a bankruptcy? How can I raise funds under these circumstances?
I am looking at starting a new business. What types of grants are available?
Grants to start a business are extremely rare. Ask business owners you know and odds are you won’t find one that started with a grant. As the old saying goes, "It takes money to make money." This is particularly true when you are thinking about starting a business. You will need to identify how much money you’ll need to get started. Expect that you’ll have to provide 20-30% as your investment in the business because 100% financing is not available.
What do I need to do to get a loan?
In order to get a loan, you will need three years of tax records (include tax records for the business if you are in operation); a personal financial statement, a credit report and copies of any outstanding contractual agreements (for example, copy of a lease). Additionally, the lender will want to see a thorough business plan that includes financial projections, a market analysis and an operational plan.
Does the SBDC offer loans?
No, the SBDC does not offer loans. Our services are technical and educational in nature. SBDCs will assist in developing business plans, calculating financial projections and packaging loans to adequately prepare clients for meetings with lenders.
What alternatives are there to financing a business?
Committing your own funds is often the first step in financing. It is certainly the best indicator of how serious you are about your business. Risking your own money gives confidence for others to invest in your business. You may want to consider family members or partners for additional financing.
When do businesses generally start returning revenue?
Most new businesses generate negative net income for the first 12-18 months.
Who do I contact to receive a loan from the Veteran’s Administration?
There are opportunities for veterans, but the Veteran’s Administration does not offer loans. The Small Business Administration has a Patriot Express available to qualifying veterans and members of the military community who are interested in starting or expanding a business. Also, veterans should check into the services and support provided by the Office of Small and Disadvantaged Business Utilization.
Is my credit score important in securing a loan?
Credit scores are becoming increasingly more important in a financial institution’s decision to lend money. Most financial institutions use a credit score as an indicator of how a person manages their personal finances. Prior to applying for a loan, you should obtain your credit score and credit report. The SBDC can assess the impact your credit score has on your ability to secure funding.
What kind of financing is available when your credit rating is bad or you have a bankruptcy? How can I raise funds under these circumstances?
Unfortunately, traditional financing options are very limited and often nonexistent. At best an individual may try to work with a micro-lender like Community Ventures Corporation; however, the poor credit rating and bankruptcy will still be an issue in a micro-lender’s decision to provide financing.
Other alternative financing options should be explored such as friends and family members as investors. As stated earlier traditional financing is not a realistic option given this scenario.
