Financing a Start-up


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Financing for a Business

Financing a start up business can be difficult, especially when no grants may exist and all lending institutions require you to have a percentage of the project total capital.

Many factors determine the extent to which a project will be funded and how much will be required from the borrower. No lender will finance 100% of a project. A general rule of thumb is that at least 20% of the project total will be provided by the business owner and/or investors. Some projects will require more. and even up to 50% before a bank will look at a deal. Some projects can require more than one lender, and GAP lenders in the area can provide additional financing to make a deal work when the bank reaches the level of risk it wants to take. The Entrepreneur Fund, Northland Foundation, and Northspan are all alternative lenders in the Arrowhead region of northeast Minnesota. 

Credit score, prior history, education, experience, and type of business are all factors in the lending decision. 

You will have to divulge all credit history and income tax records as part of the process to get financed. This will include filling out a personal financial statement, which lists all your personal assets and liabilities to determine your net worth. 

A lender will ask for a business plan, projections of the income, expenses, and cash flow. 

A CED consultant can help you with the business plan, financial projections, and filling out some of the paperwork. Consultants may also be able to accompany you to the bank to discuss the project.

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Funded in part through a Cooperative Agreement with the U.S. Small Business Administration, Minnesota Department of Employment and Economic Development and regional support partners. All opinions, conclusions or recommendations expressed are those of the author(s) and do not necessarily reflect the program sponsors. Programs are open to the public on a nondiscriminatory basis. Reasonable accommodations for persons with disabilities will be made if requested at least two weeks in advance. Contact UMD CED at 218-726-7298.