Financing a new venture is one of the most critical elements in a business start-up or expansion and can mean the success or failure of a business. Normally, new companies pursue a financing strategy that includes one or more of the following: 1) self-fund, also known as bootstrapping; 2) friends and family; 3) grants from private or public entities; 4) small business loans, usually from banks, some of which might be guaranteed by government organizations; 5) angels and venture capitalists.
Here are some of the more notable programs to assist with small business financing.
SBIR (Small Business Innovation Grants)
The SBIR (Small Business Innovation Research) and STTR (Small Business Technology Transfer) programs, two competitively awarded, three-phase Federal Government programs, are designed to stimulate technological innovation and provide opportunities for small business. This dynamic teaming of the private and public sectors include joint venture opportunities for small businesses and the nation’s premier nonprofit research institutions.
The SBIR program solicitations are issued by eleven Federal agencies, including the Department of Agriculture, the Department of Commerce, the Department of Defense, the Department of Education, the Department of Energy, the Department of Health and Human Services, the Department of Homeland Security, the Department of Transportation, the Environmental Protection Agency, the National Aeronautics and Space Administration, and the National Science Foundation. In addition to the general SBIR Web page, Federal agencies maintain department-specific SBIR and STTR programs Web pages. The High Tech Development Corporation – is a good place to start learning about the SBIR program. HTDC hold an annual conference for companies interested in the program and brings in speakers from a variety of federal agencies to discuss opportunities. Additionally, HTDC also administers matching state grants to successful Hawaii applicants to the SBIR program.
U.S. Economic Development Administration
EDA solicits applications from applicants in rural and urban areas to provide investments that support construction, non-construction, technical assistance, and revolving loan fund projects under EDA’s Public Works and Economic Adjustment Assistance programs. Grants and cooperative agreements made under these programs are designed to leverage existing regional assets and support the implementation of economic development strategies that advance new ideas and creative approaches to advance economic prosperity in distressed communities.
Oahu Resource Conservation & Development Council, Inc.
Oahu RC&D is able to expand its reach through strong partnerships with other organizations. The national RC&D program was established by the USDA’s Natural Resources Conservation Service, and the Council retains strong ties to that organization. The Council also works closely with the Oahu Soil and Water Conservation Districts to assist rural farms and land owners with conservation plans and technical assistance. Finally, the Council serves as fiscal sponsors to a number of organizations that share its goals and objectives, including Malama Hawaii and the Hawaii Community Stewardship Network.
Maui Economic Opportunity
MEO BDC provides microenterprise loans, business planning classes, and consultation services. Established in 1997, MEO has helped create more than 700 new business, 700 loans (more than $4 million), 900 jobs, and train 2,000 entrepreneurs. MEO BDC offers loans ranging from $500 to $50,000, for startup operations or expansion of existing small business. They also have emergency loans available for special situations.
Office of Hawaiian Affairs
The OHA Hua Kanu Business Loan can be used for a loan or line of credit. Due to limited funds, decisions on completed applications are made on a first come first served basis. Financing is offered up to $1,000,000. OHA refers potential loan applicants to a technical assistance provider that guides the applicant in completing the loan application packet. Applicants do not apply directly with a servicing bank.
U.S. Department of Agriculture
-BUSINESS AND INDUSTRY GUARANTEED LOANS (B&I)
The purpose of the B&I Guaranteed Loan Program is to improve, develop, or finance business, industry, and employment and improve the economic and environmental climate in rural communities. This purpose is achieved by bolstering the existing private credit structure through the guarantee of quality loans which will provide lasting community benefits.
State Department of Agriculture
-The State of Hawaii, Department of Agriculture’s Agricultural Loan Division administers the Agricultural Loan Program and the Aquaculture Loan Program. The intent of the programs is to help promote agricultural and aquacultural development of the State by providing credit at reasonable rates and terms to qualifying individuals or entities. Through the establishment of a revolving loan fund, credit is made available by supplementing private lender sector loan funds or by providing direct funding.
Considered a “lender of last resort”, the program is not intended to compete with private sector lenders.
Small Business Loans
If your business is like most startups, you’re seeking somewhere between $5,000 and $50,000 to get it off the ground. Consider an SBA loan. U.S. Small Business Administration (SBA) offers a variety of loan programs for very specific purposes. Each SBA loan program has its own eligibility criteria and application process. SBA financing options are structured for small business, with features that usually result in lower monthly payments.
The SBA provides credit guarantees to banks and other institutional lenders who provide loans to business owners. The credit guarantee enables banks to make loans that are somewhat more risky than they would otherwise make.
SBA Loan Features:
- Business loans guaranteed by the Federal government.
- Designed to provide longer-term financing to small businesses that may need longer repayment terms or other special considerations.
A good overview of the major banks in Hawaii can be found at the Hawaii Bankers Association.
Below is a selected list of lenders that provide Small Business Loans, which range depending on company background, credit, collateral, etc.
The Hawaii Angels group provides a forum for members to review investment presentations and share opinions about these opportunities. This forum also allows for networking with professionals of various backgrounds, and exploring new opportunities in Hawaii.
The Hawaii Angels process is proven and well-suited to Hawaii’s start-up scene. Since its founding in February 2002, the member angels have invested more than $30 million in over 60 companies.
Hawaii Venture Capital Association (HVCA)
Since its founding in 1988, the HVCA has stood as a nexus for Hawaii entrepreneurship, capital foundation, and networking opportunities. Fostering entrepreneurial development through education, exposure to excellent speakers and introductions to key members of our business community continues to be our goal as we move forward in growing a vibrant and successful venture community.
HVCA holds its monthly luncheon event at the Plaza Club (open to both members and the Public) where guests will be treated to a host of excellent speakers discussing the latest trends and developments in Hawaii’s growing Venture Capital industry. In addition to putting on monthly luncheon events, HVCA also hosts Hawaii’s annual Entrepreneur of the Year Award ceremony and the Venture Capital Deal of the Year Award ceremony where both entrepreneurs and companies are honored for their achievements in Hawaii’s venture community.
Hawaii Strategic Development Corporation (HSDC)
The Hawaii Strategic Development Corporation (HSDC) is an agency of the State of Hawaii established in 1990 to promote economic development and economic diversification in Hawaii through a return driven investment program in partnership with private capital. HSDC operates as a fund of funds, meaning HSDC does not invest directly into companies, but instead invests in venture capital partnerships. These investment partnerships make direct investments into Hawaii-based companies. The general partners of the venture capital partnerships, or fund managers, are private sector investors who pool funds from a number of investors, identify and invest in promising businesses, and manage the investments until an exit from the investment is achieved. In this manner, HSDC is able to leverage public funds with private capital and utilize the investment acumen of the private sector in selecting suitable investments.