You’ve probably heard of most conventional methods for funding a new business. Credit Unions, banks, and small business administration lenders are familiar avenues for securing capital to get your business started.

These are good sources for businesses with a long track record, entrepreneurs with excellent credit ratings and those who have a considerable amount of business capital in hand.

But let’s face it, especially with today’s economy, not everyone can qualify for a business loan and even fewer have enough cash to show equity in a venture just getting off the ground.

Those who can qualify usually find themselves signing for a loan that’s pitted against the equity in their personal property or real estate…and they often come away saddled with huge monthly payments reflecting a hefty chunk of interest.

So, let’s take a look at a few alternative options specifically in place for new businesses - profit or non profit. These lenders are state and local municipalities who receive annual funding from the federal government. They’re anxious to find new businesses and help them succeed because the more the more money they lend, and the more successful their turnaround, the more funding they receive the next year.

The advantage for them is a broader tax base from well funded businesses that succeed, and if you have a solid idea for a business, they’ll do everything possible to see that you not only qualify, but that your payments are affordable as well. These are low interest, often long term loans and many come with tax credits and payment deferment opportunities.

Sound too good to be true? Don’t be so sure. Since 1974, tens of thousands of businesses have taken advantage of this funding option, and in turn have grown successful, solvent businesses.

They are available in every state - BUT they are NOT advertised. You won’t find these programs in the yellow pages. You have to know what they are and where to apply.

The key to acquiring capital from these lenders is to have a solid business plan in place and know how to pitch your new business so that it falls EXACTLY within the parameters of their requirements.

So, let’s take a closer look at some of the specific funding available and how to determine which of these best fit your business needs.

We’ll start with the Community Development Block Grant Program, better known as CDBG funds. Don’t let the word grant discourage you. These are federal dollars given to all local communities for the purpose of funding new or expanding existing businesses.

The money is disbursed through Housing and Urban Development or HUD programs, to cities and counties to be loaned to individuals and companies who want to start a business. The funds are available to anyone, but they’re sometimes earmarked for businesses that can revitalize a neighborhood or will offer a job opportunity for lower to moderate income workers.

This is where a good business plan comes in - you want to show how your business can fulfill a need in your community. Keep in mind that revitalization can be as simple as occupying a building or office that is currently vacant and therefore not generating any tax money.

It can also mean offering a needed service to the community which isn’t currently available. A good business plan will describe what the need is, how the community would benefit from such a business, and how your business will fulfill that need. Job development can be as simple as offering part time work to a clerk, sales person or maintenance worker, which again, adds to the tax base of a community.

Depending on the size of your community, you will be eligible for

1. Entitlement funds, which are for large metropolitan and urban counties, or
2. Non-entitlement funds for towns and rural areas.

Both are available through local city and county governments and you will apply for them through your economic and business development departments, usually housed at City Hall or the county government offices. You’ll want to make an appointment to meet with the program’s director.

There are a number of programs available and each is tailored to a specific type of business so it’s important to learn everything you can about the program BEFORE you sit down with the economic director. This way you’ll have a good understanding of what programs might work for you and what questions to ask.

Following your first meeting, you’ll want to write up a complete business plan to have with you at the next interview. You’ll be ready to present your case with paperwork to back you up, and you’ll be ready to proceed with the appropriate applications.

To become familiar with some of these programs, go to: http://www.hud.gov/funds/index.cfm and to http://www.hud.gov/offices/cpd/communitydevelopment/programs/

You’ll find specific information on the funding available, and you’ll also find a link to get information for each State. This will give you an idea of what types of funds have been allocated to your area in the past which can be a good indicator of the funding that’s probably available this year.

Make note of the types of businesses normally funded through these programs. Be sure to list any specific qualifications, so you can be sure to include them when you draw up your business plan.

Another source for information on unconventional funding is SCORE - Counselors to America’s Small Businesses. They have several pages of good information about available funding and details a number of business-specific loans.

Go to: http://www.score.org/index.html.

So, to sum up the financing possibilities so far…

1. Remember that city, county and state governments have funding assistance available in a variety of programs for qualified small firms.
2. Make an appointment with your local economic development office to discuss the various programs available in your community and learn the requirements for qualifying.

   Don’t limit your possibilities. Don’t stop with the first financial program that appears to fit your needs. Continue your research; you may find another program more appropriate or a program that can work in-hand with the first. You may find one program to purchase or lease property, another to acquire inventory, and a third to lease or purchase some of those capital expenditures needed to get your business off the ground.

3. Be flexible - When you sit down with the economic director in your community let them know you are willing to do whatever it takes to qualify for lending and that you are open to any advice that will make your business enhance the community and broaden the tax base.
4. Once you have decided on the program or programs you want to apply for, write a business plan that reflects how your business fits the economic development plan for your community and be prepared to present it to the economic development director in detail.

Remember, these are just a few of the many types of funding available to small businesses.