Financing a business can be accomplished through various outlets. Before applying for a business loan however, it is important to know what institutions will be looking for when determining your ability to repay the loan.

What Type of Financing is Right for Your Business?

Financing a business can be accomplished through various outlets. Before applying for a business loan however, it is important to know what institutions will be looking for when determining your ability to repay the loan.

Cash is king and the more liquid assets you have in the bank in the form of reserves, the better your ability to secure financing. A large down payment is typically a requirement for business financing compared to residential lending, but every institution has different down payment guidelines. A loan with sufficient equity has the best likelihood of repayment.

Collateral is another critical component to your loan application. The institution will want to know what property (real and personal) is available in order to secure the loan. When meeting with an institution, be prepared to discuss all these items along with a thorough review of your financials and business plan.

Riverside Micro Loan Program

The Riverside Micro Loan program is available to assist local small business owners with developing, maintaining, and growing lucrative businesses. Developed through a collaborative partnership between the City of Riverside and AmPac TriState CDC, this program is a reflection of the City’s Business First philosophy and exemplifies Riverside’s efforts to help businesses thrive and create local jobs.

The Riverside Micro Loan is available to small business owners in the City of Riverside who are seeking micro-growth capital for expansion, relocation costs, major purchases and other business needs. The Micro Loans range from $5,000 to $10,000 with interest rates fixed for up to 36 months. To qualify, the business must have existed for at least 6 months in the City of Riverside, project profitability, and have a worthy credit history. To learn more, click here.

Loans

If you’re planning to start a business or expand an existing business, you might need financing help. To start the process, you should visit a local bank or lending institution that participates in SBA programs.

SBA also provides a helpful Business Loan Checklist to help you prepare to apply for loans. The following are examples of loans offered through the Small Business Administration:  

  • Basic 7(a) Loan Program
    Provides loan funding to eligible borrowers for starting, acquiring and expanding a small business. This type of loan is the most basic and the most used within SBA's business loan programs. Borrowers must apply through a participating lender institution.
  • Certified Development Company (CDC) 504 Loan Program

    Provides growing businesses with long-term, fixed-rate financing for major fixed assets, such as land and buildings.

  • Export Express
    Provide exporters and lenders with a streamlined method of obtaining financing for loans and lines of credit up to $500,000. Lenders use their own credit decision process and loan documentation; exporters get access to their funds faster. SBA provides an expedited eligibility review with a response in less than 24 hours.
  • Export Working Capital
    Offers loans targeted at businesses that are able to generate export sales but need additional working capital to support these opportunities.
  • International Trade Loans
    Gives term loans that are designed for businesses that plan to start/continue exporting or those that that have been adversely affected by competition from imports. The proceeds of the loan must enable the borrower to be in a better position to compete.

Venture Capital

Venture capital is a type of equity financing that addresses the funding needs of entrepreneurial companies that for reasons of size, assets, and stage of development cannot seek capital from more traditional sources, such as public markets and banks. Venture capital investments are generally made as cash in exchange for shares and an active role in the invested company.

Venture capital differs from traditional financing sources in that venture capital typically:

  • Focuses on young, high-growth companies
  • Invests equity capital, rather than debt
  • Takes higher risks in exchange for potential higher returns
  • Has a longer investment horizon than traditional financing
  • Actively monitors portfolio companies via board participation, strategic marketing, governance, and capital structure

Grants

  • Small Business Innovation Research Program (SBIR)
    SBIR is a highly competitive program that encourages small business to explore their technological potential and provides the incentive to profit from its commercialization. By reserving a specific percentage of federal R&D funds for small business, SBIR protects the small business and enables it to compete on the same level as larger businesses. SBIR funds the critical startup and development stages and it encourages the commercialization of a technology, product, or service, which, in turn, stimulates the U.S. economy.

  • Small Business Technology Transfer Program (STTR)
    STTR is an important small business program that expands funding opportunities in the federal innovation research and development arena. Each year, five federal departments and agencies are required by STTR to reserve a portion of their R&D funds for award to small business/nonprofit research institution partnerships. Following submission of proposals, agencies make STTR awards based on small business/nonprofit research institution qualification, degree of innovation, and future market potential.