Types of Funding

• Types of Funding
• What Lenders Consider
• Critical Questions
• Loan Proposal

It is important to explore all of your financing options before making a decision about which option is best for you. Several sources of financing to consider are:

• Personal Savings: The primary source of capital for most new businesses comes from savings and other personal resources. While credit cards are often used to finance business needs, there are usually better options available, as the interest rates on credit cards can be very high.
• Friends and Relatives: Many entrepreneurs look to private sources such as friends and family when starting out in a business venture. Often, money is loaned interest-free or at a low interest rate, which can be beneficial when getting started. It is important, however, to put the terms of the loans in writing to avoid any misunderstandings that could harm your personal relationships.
• Banks and Credit Unions: The most common sources of funding, banks and credit unions, will provide a loan if you can show that your business proposal is sound. For startup companies, however, the burden of proof is much higher than for an existing business looking for a loan to expand current operations. Conservative projections and careful attention to the assumptions that underlie these projections are critical to increasing chances of startup funding.
• Angel Investors and Venture Capital firms: These individuals and firms help expanding companies grow in exchange for equity or partial ownership of the company.

There are particular programs targeted to help startup businesses secure financing by reducing the risk to traditional lenders who make loans to small businesses. These programs, run by the Small Business Administration (SBA) on the federal level and Louisiana Economic Development Corporation (LEDC) on the state level, do not make any direct loans to business owners. Yet, as a business owner, you should be sure your lender is aware of these programs that aim to make lending to small businesses more attractive to improve your chances of securing funds. Again, both the SBA and LEDC's programs are administered through traditional lenders such as banks.

Be sure to visit our Financial Incentives and the Resources page.

Baton Rouge Small Business Loan Fund 

Program Description
The Baton Rouge Small Business Loan Fund, which is managed by Seedco Financial, provides loans from $5000 to $150,000 for small business owners.  Loans may be used for working capital, debt consolidation, expansion, or other activities.  Eligible applicants include first time or experienced borrowers who have not been able to obtain bank or other standard financing, have existing businesses and a proven track record, employ 50 or fewer workers, and are located in East Baton Rouge Parish.  The Loan Fund is a program of the City of Baton Rouge, the Baton Rouge Bankers Roundtable, and Entergy.  Technical assistance partners include the Small Business Development Centers at LSU and Southern University.

Contact
Brandon Williams
Seedco Financial
504.520.5729
bwilliams@seedco.org

Small Business Innovation Research Program (SBIR)

One other financing program to consider is the Small Business Innovation Research Program (SBIR) .

Program Description
The SBIR program, established in 1982, provides an exceptional opportunity for any innovator who is capable of conducting high quality research and development. The SBIR program is a competitive grant program for small business concerns to engage in research and development that has the potential for commercialization. Phase I awards are up to $100,000 and Phase II awards are up to $750,000.

Requirements
Proposal guidelines are issued by the federal agencies. Phase I duration is approximately six months and Phase II duration may not exceed two years.

Contact
Louisiana Business & Technology Center
Bryan Greenwood
225.578.7555
bgreenwood@lsbds.org

Small Business Innovation Research (SBIR) Tax Credit

Program Description
Companies who receive federal grants for Small Business Innovation Research are eligible for a refundable tax credit equal to 40% of the SBIR award.

Requirements
Company must be a recipient of a federal SBIR grant.

Contact
Susan Bigner
225.342.5651
bigner@la.gov

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