Financing

Small business financing is available through many established traditional lending institutions, however due to the difficulty in accessing capital as a small and/or newer business, this section of the Web-site will provide information on alternative and less-traditional financing options for small businesses.

US-Small Business Administration

The US Small Business Administration offers various loan programs to financially healthy small businesses that may not otherwise have access to capital through traditional lending. Local financial institutions or economic development agencies, not the local SBA office, usually administer SBA loan programs. A few of the most popular SBA programs are listed below.

• 7(A) Loan Guaranty Program: As the primary SBA loan program, this financing option reduces risk to lenders by guaranteeing major portions of loans made to small businesses. The 7(A) loan can be used to expand or renovate facilities; purchase machinery, equipment, fixtures, and leasehold improvements; finance receivables; augment working capital; refinance existing debt with compelling reason; finance seasonal lines of credit; construct commercial buildings and/or purchase land or buildings. 

• SBA Express: Available for loans up to $350,000, where the SBA guarantees up to 50% of the loan, and loans under $25,000 do not require collateral. Like most 7 (A) loans, maturities are usually 5-7 years for working capital and up to 25 years for real estate and equipment. Revolving lines of credit are allowed for a maximum of five years. 

• CAP Lines: A revolving line of credit designed to help small business owners meet their short term and cyclical working capital financing needs. There are five loan programs under the CAP Lines umbrella, which may be used to finance seasonal working capital needs; finance direct costs for construction, service and supply contracts; finance purchase orders by obtaining advances against existing inventory and accounts receivables; and consolidate short-term debt. 

• Export Working Capital Program: The EWCP provides pre or post shipment working capital financing for export activities. It is transaction-based and can be a revolving line of credit or structured for each purchase order, shipment or contract. This loan may not be used for refinancing fixed assets, marketing, or setting up operations abroad. 

For a complete listing of SBA Guaranty Loan Programs, click on the following link. For more information on how to find a participating lender, contact the Michigan SBA office at (313) 226-6075 or visit www.sba.gov/mi.

CEED (Center for Enpowerment and Economic Development)

As one of the first micro lenders in the country since 1984, CEED (Center for Empowerment and Economic Development) provides not only access to needed funds, but also business tools, resources and support and training services to increase business growth opportunities for women and minorities.  The CEED's microloan program offers capital assistance from $5,000 to $35,000 to entrepreneurs and business owners in Michigan.  For information about this and other programs, visit the CEED website.

Credit Union Small Business Financing Alliance

In the quest to rebuild Michigan's economy and create jobs, a new partnership between the State of Michigan and the Michigan Credit Union League has been created to help fund entrepreneurs and small business owners, with more than 30 Michigan credit unions committing an initial $43 million. The Michigan Credit Union Small Business Financing Alliance's (CUSBFA) new website, www.cusbfa.com, provides small businesses access to the CUSBFA counseling form, information on financing from participating credit unions and additional state and federal programs that will assist entrepreneurs in moving businesses forward.  There are no loan limits for CUSBFA consideration, and each participating credit union will use its own underwriting standards and policies for loan consideration and approval.  Start-up and small business owners are encouraged to complete the online CUSBFA consulting form to assist in determining their next step in helping them realize a new future.

Other Funding Options:

• Personal: Individuals will probably need to invest some personal resources into the business typically by acquiring a loan from a 401k, home equity, or investment from an IRA 

• Family and Friends: Similar to personal financing, but acquired through a known and trusted source. 

• Peer to Peer (P2P): Fairly new, but widely used financing option for businesses in need of micro-loans ($5,000 - $35,000). As with any alternative financing, business-owners must practice responsible and careful borrowing. Some of the most popular P2P sites are Prosper, Lending Club, Globe Funder, and Zopa.   

• Community Development Financial Institutions: These loans are usually reserved for distressed areas, or projects that will make a positive community and economic development impact. Shorebank and the Michigan Interfaith Trust Fund are the two local CDFI servicing Michigan businesses. 

• Venture Capitalists and Angel Investors: Angels and Venture Capitalists are usually willing to invest in very specific industries depending on the fund. It is best to research the fund to determine the type of businesses that they tend to support before approaching the fund. Visit the Michigan Venture Capital Association for more information on area venture capitalists. Visit Capital Community Angels, Blue Water Angels, and Grand Angels for more information on the respective angel investors. 

• Asset Based Lenders: This type of loan is best for less-bankable companies with a negative net worth, that have existing account receivables. Local asset based lenders include Hennessy Capital, Michigan Commercial Credit, and Crestmark Bank. 

* The City of Rochester Hills does not recommend or endorse any of the business financing options listed. Businesses interested in financing should seek professional advice when choosing investors to determine the most appropriate options for their company.