Financing Your Business

Belknap EDC is here to help you navigate the process of financing your business start-up or expansion. The graph below provides an overview of the variety of financing options out there (brief descriptions and web links are found below the graph). Our loan officer, Ken Wilson ken@belknapedc.org is available to assist you in determining the most appropriate type of financing for your project. Please call Ken at (603) 366-8069 for an appointment.

 

Conventional Loans

Most banks provide loans and lines of credit to businesses that have successfully entered the market with their product or service and are already profitable or approaching profitability. If you are an established business with cash flow, the best place for you to start your search for financing is with one of these banks. Conventional financing is the lowest cost option.

Any of these banks can take advantage of state and federal loan guarantee programs designed to reduce the bank’s risk. The US Small Business Administration (SBA), US Department of Agriculture (USDA), and the NH Business Finance Authority all offer guarantee programs designed to extend the reach of commercial banks. Ask your loan officer if your project might benefit from any of these programs before you begin your loan application.

Subordinate Debt

Belknap EDC’s revolving loan fund has provided gap financing to over 70 local businesses since 1992. While our loans typically supplement conventional financing from a private bank (which is why we are categorized as “subordinate debt”), we have provided primary financing for several local businesses as well. Belknap EDC has loan products to meet the needs of any size business. Whether you are a sole proprietor just starting out, an established small business seeking to grow, or a large company putting together a complex financing package, please contact our loan officer, Ken Wilson at ken@belknapedc.org or (603) 366-8069 to discuss your project.

 Click here to download a copy of Belknap EDC’s Loan Application. We strongly encourage you to speak to our loan officer before you complete your application.

Belknap  EDC is an equal opportunity lender and adheres to the US Department of Agriculture's non-discrimination statement.

Equity Financing

Entrepreneurs typically rely on their own financial resources and that of family and friends for most of the start-up phases of their business (proof of concept, prototyping, product development, and commercialization). Sometimes angel investors provide capital for the product development and commercialization stages, after the entrepreneur has demonstrated that there is strong growth potential. This funding usually takes the form of equity financing, whereby the investors receive an ownership stake in the business which affords them the right to be involved in management decisions. Equity financing deals are most appropriate for businesses that will grow rapidly – most companies that are funded this way are sold, either through an initial public offering (IPO) or to a larger company, within a few years.

In some urban areas, there may be several active “angel networks” or venture capital firms that pro-actively seek out these types of investment opportunities. The only investment group of this kind available to Lakes Region entrepreneurs is the statewide Granite Fund recently created by Borealis Ventures in partnership with the NH Business Finance Authority.

Royalty Financing

If a business gets turned down for a conventional loan and/or subordinate debt but does not want an outside equity investor, there is now an alternative. Don’t shelve that growth plan before considering royalty financing. The way royalty financing works is that the investor gets paid a percentage of future gross revenue for a negotiated period of time. Unlike the equity investor, they become an advisor but do not make any business decisions and do not try to position the company for sale. Royalty financing is an alternative to equity financing for high margin businesses (better than 25% gross profit margin) with a strong growth proposition. Lakes Region companies interested in exploring royalty financing should contact Vested for Growth, a royalty investment product offered by the Community Loan Fund.

Crowd Funding

According to this Forbes article, crowd funding is “the practice of funding a project or venture by raising many small amounts of money from a large number of people, typically via the Internet.” This phenomenon began in 2008, but with the passage of the JOBS ACT in April 2012, and the protections that this afforded individuals who participate in crowd funding, many high-tech start-ups began looking at crowd funding more seriously than they had before.

Two of the most popular crowd funding sites are Kickstarter and IndieGoGo, but there are hosts of others cropping up. Kiva Zip is a site that crowd funds 0% interest loans to very small businesses – the max loan is $5,000. Kiva Zip recently expanded to NH and is now an option for Lakes Region entrepreneurs seeking small amounts of capital.