Finding Financing

Where will the money come from?

One of the most frequently asked questions we get at the New Hampshire Small Business Development Center is how to go about locating and obtaining financing for a small business, and that includes new businesses and existing small businesses. The NH SBDC does not have direct access to business grants or loans, but we can help and advise you through every step of the loan process. A key component of the loan process is developing a Business Plan, which will be used when you apply for a business loan from a lender.

Quite often, the majority of financing for a new business comes directly from the business owner’s own sources of money. Friends and family members are also a common source of funds for someone starting a new business.

Business loans and other financing options

Business loans can be sought in a variety of ways. Numerous local banks and other lending institutions have small business lending programs, offering loans from a few thousand dollars up to millions of dollars. In New Hampshire, a business owner may seek out micro-loans, commercial loans, commercial loans with government guarantees, alternative lending programs and/or financing from venture capitalists or angel investors.

Besides obtaining a business loan, you may want or need to obtain other financing, such as equity financing. Some new businesses are financed totally or in part through various kinds of equity financing, which simply means that others buy a share of the business. There are several types of equity financing but, generally speaking, those who invest in your company do so in order to get a return on that investment—whether a modest return or a large return. Your friends and/or family members, for example, may invest in your business in exchange for a small return on their investment, while venture capitalists will make riskier investments in new businesses in order to see a large return on their money. An “angel investor” is an individual who may invest his or her own wealth in your business. The Equity Financing section gives more details on the various types of equity financing.

First steps: Review our e-courses

A good place to start learning how to finance your business is our NH SBDC e -courses, which cover several areas of financing. The relevant courses include “Financing a Business in New Hampshire,” “Finding Money to Start a Business,” “Creating a Loan Package”, “Creating Financial Projections” and “Finding and Attracting Investors.”

Taking stock of your own financial resources is a good starting point. Do you have cash, home equity and other personal assets that can be used to finance your business? Do you have family and friends who might be willing to join you in the investment, perhaps for a share of the revenues when your business is up and running?

Most financing programs and lenders, including federal or state government programs, will look more favorably on a business loan application if it includes a detailed Business Plan. Lenders also want to see that you will be investing at least some of your own money in the business, and they’ll want to see how you’ll do that. Preparing a thorough Business Plan assures lenders of your seriousness and gives them the kind of information they need to best determine that your business idea will be a sound investment and will not put the lender at great risk. A Business Plan is especially important for those seeking financing for brand new businesses or for those who seek a very large loan.

After getting a Business Plan sketched out, it may be time for you to meet with one of our business advisors or to begin the process of seeking financing.