Saginaw Small Business Information Network Roadmap: Financing Programs

Preparation

• Credit Issues:

Since the creation of the unified credit score, loan approval is largely based on the individual’s credit score.

One of the first considerations an individual looking toward applying for a business loan needs to determine is: Does he/she have good enough credit to secure a business loan? A credit score that is good enough to buy a home may not be good enough to secure a business loan.

How to obtain your credit score: There are locations on the internet that can give you your score free, but the free sites do not give an explanation as to why your score is the way it is. The three credit reporting companies, Experien, Equifax and Trans-Union have their own web sites and reports can be ordered from them. Locally, reports can be obtained from Green Paths (the former Consumer Credit Counseling Services). They are located at 4600 Fashion Square Blvd. No appointment is necessary. There are credit counselors available to explain your score to you free of charge.

• Equity: Owners’ New Cash Investment

Depending upon the source of the loan, this dollar amount can range from 10% to 30%. This often depends on how the dollars will be used (i.e. land, building equipment, inventory, etc.). For example, for a 100,000 project at 20% down, a person would need $20,000 in cash and a $80,000 loan. This does not include dollars the owner may have already invested in the business.

• You Will Also Need:
• Business Plan:

Typically, a business plan is also required to be considered for Tax Incentives, qualified project related grants and other funding sources.” Part of the application process for a business loan to a financial institution is the Business Plan for the proposed project. Even if an individual may not need a loan to start a business the plan is an invaluable tool that becomes the business’s road map or blue print of how it will operate.

For an outline of a business plan and those organizations that can assist you, please refer to the pages on Counseling & Education and Business Plans.

• Collateral:

The financial institution will determine how much collateral an individual needs. It is often a 1 to 1 ratio. Meaning an applicant needs a dollar in collateral for every dollar amount he/she is requesting in the form of a loan.

• Personal Financial Statement:

All financial institutions require a listing of all your assets and liabilities (i.e. the current market value of everything the applicant owns and everything he/she owes).

Locating Business Start-up Money

According to the US Small Business Administration (SBA) the listing below indicates the source(s), nationally, of where entrepreneurs secure their start-up funds.

Check with your local bank or community credit union and ask them about an SBA Guaranteed Loan: You MUST go through a bank and is accessed as part of the overall bank loan process.

Below is a listing of additional or gap financing sources:

Saginaw Economic Development Corporation’s (SEDC) Revolving Loan Program
Phone: (989) 759-1395

East Central MI Regional Planning commission’s Revolving Loan Fund
Phone: (989) 797-0800

US Department of Agriculture’s Small Business Loans
Phone: (231) 941-0951

Michigan Interfaith Trust Fund (formerly the McGeHee Interfaith Fund)
Their web site is: www.interfaithtrust.org

Business start-up Grants

There is a lot of misinformation when it comes to grant programs. There are grant programs, but they are difficult to find and track. Funding agencies are very specific regarding the type of business or organization that they will fund and usually revolve around some type of long-term benefit to the population. Generally speaking, you should not rely on grants to start your business. Here are a few examples of grant programs currently available as well as some other non-traditional resources:

• Child Day Care: The State of Michigan 4C organization provides a competitive process to award small grants to new day care providers.  Availability is based on federal funding of the program.  Call the local Saginaw office at: (989) 497-0680. The Michigan 4C Association can be reached at (877) 258-5258. They do maintain a web site at www.mi4c.org, but details regarding the grant are not at the web site. Current grant opportunities range from $3,500 to $15,000.

• Disabled Persons working with a Social Security Insurance (SSI) worker: Small grant for business start-up. Grant is processed through your SSI worker.

• Project Specific: Highly specialized firms in areas of health, home-land security, high-end technology and other areas identified as targets by the US government. (For example: a business that will produce a new kind of alternative fuel for cars.)

Grants & Other Alternative Funding Sources

Federal Grants

If you are interested in looking at information regarding federal grants see the following web sites:

• Federal Funding Report can be found at www.house.gov/ffr
• Federal Register can be found at www.access.gpo.gov
• Catalog of Federal Domestic Assistance can be found at www.cfda.gov
• U.S. Small Business Administration at www.sba.gov/expanding/grants.html

Two articles that may be of interest:

Article: The Truth About Grants Handout: An article from the MISB&TDC for Business Direct Weekly. (Adobe PDF Reader required)

Article: Free Money From Grants Scam: An objective warning about offers of "free government grant" money. (Adobe PDF Reader required)

Research grants or contracts are available through departments of the government such as the Department of Defense, Department of Education, Department of Transportation, and the National Science Foundation. These research grants are very competitive. A good place to start looking is at www.win-sbir.com.

Or view the “technology initiatives” button on the MiSBTDC website: http://www.gvsu.edu/misbtdc/

Grants from Foundations

If you are doing something beneficial for the community such as starting a homeless shelter or program for troubled teens, you may wish to seek funding from a foundation. Foundations may require that you be a non-profit, but before you go through the process of obtaining non-profit status, contact local or national foundations to see whether there would be a fit with your organization and the likelihood of obtaining funding. To research foundations, see www.fdncenter.org.

Another source is the Saginaw Community Foundation, which provides local assistance, see www.saginawfoundation.org

Community Incentives

Cities who are trying to attract new businesses to their area may have incentives to locating there. Check with your city planning and development department to see if there are loans or grants available through the city.

Loans for Women

Count Me In is a non-profit organization formed to make microloans to women starting or expanding their business – ranging from $500 to $10,000. www.count-me-in.org or call (212) 691-6380.

Palo Alto Software regularly sponsors an annual business plan competition. They have given away prizes to both new and existing businesses, in amounts ranging from $1,000 to $25,000. See their web site at www.paloalto.com/competition for the official rules.

For tech companies, check out the Great Lakes Entrepreneur Quest, an annual statewide competition for small businesses at www.gleq.org