Creative cash | Alternative funding options are available in Maine, if you know where to look
These are trying times for businesses in need of financing. Creativity is critical in this economy for every business owner, even when it comes to drumming up money. The good news is there are a number of organizations that offer direct loans, grants and other financing that you may not have considered. Some of these funding opportunities are statewide, some are restricted to certain regions and others support specific demographics like women or young entrepreneurs.
We all know about the more traditional lenders — Maine Technology Institute, the Finance Authority of Maine and, of course, banks and credit unions. But here are some alternative lenders you may not have thought of that can and do make modest cash investments of under $35,000, even to businesses that have been declined by a bank. I have limited my topic to these smaller loans because of space constraints, but there are, of course, other funding options for bigger needs.
- Government agencies: Regional councils of government (like the Androscoggin Valley Council of Governments, the Greater Portland Council of Governments, etc.) and regional and municipal economic development organizations have lending programs for businesses in their communities. Some offer loans in conjunction with banks, but some will also make direct loans when banks have said no. All these programs to some degree still take into account your credit history, what the funds are for and the likelihood of repayment, but the weight they put on these criteria varies. For more information check out www.famemaine.com.
- Small Business Administration funds: Many direct loan programs are funded by allocations from the Small Business Administration and have a cap of $35,000. Once that year’s allocation has been lent by the organization, you may have to wait until the next fiscal period for it to be replenished. The good news is it appears the SBA is going to receive significant additional funding under the stimulus package, so there should be more cash available and some positive changes to the SBA programs (see “SBA waits for stimulus bucks,” March 23, 2009). One program in particular, the Business Stabilization Program, will allow local SBAs to fully guarantee loans of up to $35,000 to businesses experiencing immediate financial hardship. The stimulus will also allow the SBA to fully subsidize the borrower’s interest payments on those stabilization loans and the borrower does not need to begin repayment until 12 months after receiving the loan. Community Concepts Inc., based in South Paris, and Coastal Enterprises Inc., based in Wiscasset, are two other organizations that offer financing for modest business needs. Log onto www.sba.gov/localresources/district/me/index.html for more.
- Community and service organizations: The Libra Foundation runs the Libra Future Fund, which offers 18- to 29-year-olds grants of $3,000 to $5,000. This fund was established to help stem youth out-migration and is used to promote economic development or create job opportunities. And the Cumberland Lions Club has an Enterprise Fund to assist young entrepreneurs in their town with grants of up to $1,500. The nonprofit Maine Centers for Women, Work and Community offers a few loans of up to $1,500 each year through its New Ventures Loan Fund to individuals trying to start a small business. The moral of the story? Look for foundations and organizations in your area that may be receptive to your business plan.
- Online: An interesting new source of smaller financing needs is the Internet. There are predominantly two types of financing sites: websites that will find lenders for you for a fee and websites on which you post your need and then interested individuals compete to lend to you. The riskier the loan, the higher the interest rate, so make sure your business plan can accommodate your borrowing cost. Beware: Two years ago a former client of mine (against my recommendation) went for these loans repeatedly because they were so easy to get, but the loans carried ever-higher rates of interest and the client accumulated more debt than he could handle. These loans are like credit cards: If you can’t control yourself and can’t pay them back, don’t even consider them. (For more on this, read “Perfect strangers.")
It’s important to remember that at any given time an organization may not have money available because it has committed its resources. So be persistent and ask when that organization thinks it will have more funding. Keep asking around for organizations with programs that have money to lend and whose criteria you may fit. After all, you probably know of sources I have not mentioned — even I periodically stumble onto funding sources I didn’t realize existed.
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