2024 guide to small business funding, part 3

Updated 10/11/24

funding small business with alternative sources, investments + grants

This is the third and (as of now) final post with resources to help you find funding for your small business in New Mexico. This post includes:

• About Credit Options

• About Roll Over Business Start Ups and links to companies that can assist you

• About Peer-to-Peer Lending and links to P2P sites

• About Crowdfunding for Business and links to crowdfunding platforms

• Links to Grant and Scholarship Awards

• About Equity Financing and Links to Investors

BUSINESS CREDIT CARD

It is easier to get a business credit card than a bank loan. And, business credit cards come with additional benefits. These benefits might include rewards or cash back, loyalty points, travel protections. hotel discounts, airline miles, no annual fee, competitive APR, and more.

Visit sites like Forbes or Investopedia to see what current offers might be and how they are ranked. Decide which benefits would be the most useful for you and your business. And, prioritize what you value most among rewards, cash back, and building credit.

BUSINESS LINE OF CREDIT

With this funding option, a bank gives you a line of credit (similar to a credit card.) You withdraw funds from that account as you need them. The bank only charges you interest on the money used and you pay it back on your own schedule (as long as you don't go over your limit.)

To get a business line of credit you need to show that you've put personal investments into your business, you aren't losing money, and you have industry experience. You also need a good credit score and a business plan.

HOME EQUITY LINE OF CREDIT

I almost didn't list this one because the risk involved is high. A home equity line of credit has the flexibility of a credit card but with a lower interest rate - because your home is securing the loan. If you default on your payments, you could have your home foreclosed.

There are three different ways you can fund your small business using your 401(k) retirement funds:

1. You can cash out these funds.

2. You can borrow against your 401(k).

3. You can use a rollover for business startups.

Of those three options, ROBS is the only option that does not result in interest charges, taxes, or penalties. ROBS allows you to start a business or purchase a business with your retirement savings without paying early withdrawal fees or tax penalties. But, be forewarned: ROBS transactions are not quick or easy. It requires complicated and extensive paperwork. You can't do it on your own. Make sure to speak with a ROBS provider who has experience.

Here are a few national companies that specialize in Roll Over Business Startups.

Guidant Financial is highly experienced and is said to have excellent customer service, and offers free audit support

Business Funding Trust specializes in sole proprietors

FranFund specializes in 401(k) funding bu also offers SBA loans, and several types of business loans. Another specialty is working with people opening a franchise.

Benetrends has been around for over 40 years. They specialize in ROBS and also offer SBA loans and other funding options.

MySolo401K Financial has the lowest setup fees.

Peer-to-Peer (P2P) involves lending money directly to individuals or businesses without an intermediary. P2P lending platforms use online tools to match lenders and borrowers, and may offer services like identity verification, credit models, and loan approval. Originally, P2P lending websites connected individual borrowers directly to individual lenders, but it's now more common that they partner with larger financing sources, like banks and hedge funds.

A P2P loan is usually based on creditworthiness and it must be repaid with interest over a set loan term. Just as with loan requests to a bank, you have a better chance at getting financial support if you have good credit.

The SBA issued a brief about P2P being a viable alternative for funding. If you want to learn more, this article at Investopedia has a lot of useful information about P2P lending.

Through crowdfunding, you can fund a small business by getting smaller investments from a large number of people.

All crowdfunding platforms require a heavy investment of time and creative resources to develop a targeted marketing plan. Each crowdfunding platform is better suited for specific types of projects and each has vastly different restrictions and requirements.

There are two ways to get funding that you do not have to pay back: grants and scholarships.

GRANT SEARCH TOOLS

GrantsForWomen.org is a directory of grants for women. These are not all business-focused, but many of them are.

Idea Cafe Small Biz Grant Center is a directory of grant opportunities and resources.

New Mexico Grant Watch GrantWatch is a massive database of foundation and federal grant opportunities for individuals, businesses, non-profits and municipalities. You can filter your search by location, funding category, type of funder, and more. BUT - it's a paid subscription service.

CO is the U.S. Chamber of Commerce’s

link

CO is the U.S. Chamber of Commerce's digital platform for small business and is dedicated to helping business owners across the U.S. start, run, and grow successful companies. They have a list of 60+ grants and other small business funding opportunities, which they update weekly.

GRANT AWARDS

There are a lot of grant opportunities for women, minorities, and veterans as well as for specific industries. And there are lots of government grants, usually through the economic development offices of small/local government agencies.

While you do not have to pay back funds received as a grant, it is not "free money." It takes a lot of time and effort to prepare a grant application, to go through the funding process, and to report back on how funds were used. Grant applications and reporting on grant funding takes a lot of time and effort and meticulous record-keeping.

This list of grants is just scratching the surface of what is out there.

Cartier Women's Initiative is an annual international entrepreneurship program that aims to drive change by empowering women impact entrepreneurs. Founded by Cartier in 2006, the program is open to women-run and women-owned businesses from any country and sector that aim to have a strong and sustainable social and/or environmental impact.

The City of Santa Fe, Arts & Culture Department has microgrants for artists.

Comcast Rise is a multi-year commitment to provide marketing, creative, media, and technology services to Black, Indigenous, and People of Color that own small businesses.

To be eligible for the FedEx Small Business Grant, a small business must be for-profit, have a valid FedEx business shipping account number, currently ship with FedEx, and have fewer than 99 employees.

In addition to grants for tribal governments, the U.S. Department of the Interior - Indian Affairs has grants for small businesses.

The National Association for the Self-Employed

has two growth grants for small businesses.

New Mexico Small Business Assistance Program is a joint project between the Los Alamos National Laboratory and Sandia National Labs, which provides small businesses access to scientists and engineers to help solve technical problems. They have given nearly $60 million in grants through this project.

The Regional Development Corporation is a nonprofit that provides private investment opportunities and technical assistance to facilitate job growth in Los Alamos, Mora, Rio Arriba, Sandoval, San Miguel, Santa Fe, Taos, and the municipalities and Native American Pueblos therein. Grants listed below

• Micro-Grant Fund is $500 - $3000 grants to help businesses grow and create jobs

• RDC Team / Manufacturing Fund is a no-interest loan up to $20,000 for technology and manufacturing businesses

• RDC Tribal Economic Diversity Fund gives grants from $1,000 to $8,000 to businesses owned by federally recognized tribes or businesses that have 51% or more ownership by an enrollee. Small window for applications begins in July.

The U.S. Department of Agriculture has a ridiculous amount of grant opportunities for small business farmers, including (but not limited to) rural development, new farmers, food distribution, urban agriculture, specialty crops, and more.

WomensNet Amber Grant gives $10,000 grants to women business owners and they help you find loans and other grant opportunities.

SCHOLARSHIPS

Scholarships are generally restricted to students. If you are currently a student looking to start your own business, there are tons of scholarships out there to support your entrepreneurship and future small business. Here are a few of those scholarships.

Finimpact contacted me with this page they compiled with links and application tips to 21 entrepreneur scholarships.

Thiel Fellowship funds entrepreneurs under the age of 23.

With equity financing, the lender is given partial ownership of the company in exchange for the funding.

MEZZANINE FINANCING

Mezzanine Financing is a cross between a loan and investment. It is a type of secured loan because you only have to give up partial ownership in the company if you default on your loan payments.

VENTURE CAPITALISTS

Venture capitalists are individuals or firms that can make significant investments. But, they only do so with companies they deem highly likely to succeed, have rapid growth potential, and which will offer them a big pay out.

This list of capital investors are either from New Mexico or will fund businesses in New Mexico. There are also several investor search sites.

ANGEL INVESTORS

Angel Investors also pony up money for a stake in the company. Unlike venture capitalists, who invest huge money in businesses that are likely to give them an almost immediate return, Angel Investors recognize that profitability takes time for most of us.

If working with an Angel Investor looks like a path you want to take, be prepared for a long process and check out this Forbes article with 20 tips. If you do find an investor, here's a free template for a promissory note that will lay out the terms of the loan.

Some of these Angel Investor groups are located in New Mexico and others fund specific demographic groups of business owners.

2024 guide to funding small businesses in new mexico

• Part 1: Introduction, Why Small Businesses Matter, Resources and Trainings

• Part 2: Business Loans and Micro-Financing

• Part 3: Alternative Funding, Capital Investments, and Grants

PLEASE SHARE AND CREDIT.

I'm not promoting, recommending, or advocating for any of these institutions. The organizations, their services, and their websites are are shared so you have the tools and information you need to make the best financial decision for you and your business.

Please share this information with your friends, family, and colleagues. This list is only useful if the people that need it see it.

If you know about a funding opportunity that's not listed, please send me a message.

Happy fund-hunting!