Financing Your Business
Chances are, that during the early phases of your business, you’ll need access to additional sources of funding. Where do you go to find those sources?
The Small Business Administration (SBA), while not providing a lending service itself, has worked with local financial institutions to make access to financial capital easier for small businesses.
Before applying for a business loan, understand what your financial requirements are and your ability to pay back a loan over a specific time period. Be realistic with your expectations for growth and expansion. You don’t want to incur significant debt without the ability to pay it off.
Here is a link to the local financial institutions who have been certified by the SBA to offer loans to small businesses: https://www.sba.gov/sites/default/files/articles/HI%20Lenders%2010-10.pdf
As you can see there are several options for you to chose from when it comes to applying for a loan. If your application is denied the first time, don’t take it as a set-back. Instead, ask the lending institution for feedback. Perhaps you need to make changes to your business plan or add additional personnel with greater experience. Take every challenge, whether successful or not, as a learning experience.
Another form of financial assistance is venture capital. Often, a business is too new or too risky for a financial institution to approve a loan. Venture capital may be another option. You can think of venture capital as a way to raise funds that come at the expense of sacrificing a portion of your ownership of the business. A venture capitalist is an individual (or group of individuals) or a company that is willing to invest in your business in return for a percentage of ownership. It’s important to understand that although you are surrendering a portion of your ownership, the venture capitalist is investing in your business model and taking substantial risk that they will return a profit. Many venture capitalists lose money on their investments in the hope of finding a company that will ultimately not only return a profit but will also cover their losses from prior unsuccessful investments. Those who engage in providing venture capital often have years of experience managing and owing their own businesses and can provide much needed mentorship to new businesses.
For additional information about venture capital opportunities in Hawaii, you may want to consider Hawaii Angels, a local network of seed-level investors looking for small businesses with great potential.
Another source of venture capital to consider is the Hawaii Venture Capital Association (HVCA)