Raising Capital

Raising capital is a foundation of business activity. Sources always include the business owner’s own resources, including savings accounts, retirement funds, life insurance, friends and relatives and, more conventionally, banks, credit unions and non-bank lenders. 

Alternatives sources of capital include advertising, credit cards, money brokers such as online brokers or lenders — including SBA Lender Match — along with Crowd Funding, merchant credit, non-regulated lending, Angels and Equity Lenders and even purchase order financing or factoring of goods or services.

Recently, I was asked about a small business borrowing money and what may have changed in the past five years. The answer is straightforward. Not much has changed other than money has become more expensive because of higher interest rates. Prime Rate, the interest rate that banks use as a basis to set the rate for different types of lending products such as loans, credit cards and lines of credit, is 8.5%. 

That rate also affects certain mortgage rates, like variable rate mortgages, home equity loans or home equity lines of credit.

Borrowers need to be prepared when they approach a lender. An easy way to become prepared is by participating in the First Wednesday SBA Loan Clinic, which are available on every first Wednesday of the month to assist potential borrowers.

SBA’s First Wednesday of the month Loan Clinic materials provide the information and insight a potential borrower needs to know to make an informed decision regarding funding choices.

Generally speaking, SBA-guaranteed loans are attractive to small business owners because they have longer terms and lower down payment requirements than conventional loan products. Further, SBA-guaranteed loans have capped interest rates and no balloon payments. The loans are made through a private lender and then guaranteed by the SBA. That guarantee lowers the lender’s risk, which allows them to approve borrowers where they may not have been able to extend credit otherwise.

Other small business loans, such as micro-loans, Certified Development Companies (CDC 504 loans), and business startup/venture capital and alternative funding sources such as factoring are all included in the First Wednesday of the month SBA Loan Clinic presentation along with discussion of the Five C’s of Credit: Character, Capacity, Capital, Collateral and Condition. 

Another great source of information on raising capital is from an SBA-funded resource partner. There is never any charge for small business counseling and information is always available at www.sba.gov, where you can find information on the SCORE Association, America’s Small Business Development Center Network, Women Business Centers (now located in all 50 states) and Veteran Business Opportunity Centers.

It is exciting for me to participate again this year with In Business Magazine as they launch the 2024 Small Business Guide, because it is such a useful directory for local and area businesses.

Robert Blaney
District Director
U.S. Small Business Administration, Arizona District

Robert Blaney has served as the district director of the U.S. Small Business Administration for the State of Arizona since 1998. His varied experience includes work as a federal agent, police officer, vice president of an insurance brokerage and district director for the late Congressman Jack Kemp. He is a native of western New York and a graduate of Buffalo State University.