This story is part of the Salt Lake Tribune’s ongoing commitment to identifying solutions to Utah’s biggest challenges through the work of the Innovation Lab.
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You have what you are convinced is a brilliant idea for a new business. Maybe you want to deploy a food truck that serves mouth-watering family dishes. Maybe you can imagine a tutoring service that will help even the toughest students graduate from high school. Or maybe, with visions of Bill Gates dancing through your brain, you’ve developed a computer program that could rival Microsoft.
The problem is, in order to make money, you have to spend money – and, right now, you don’t have any money to spend. So how do you get the money to cash in on your idea?
Well, there isn’t just one way to finance a business venture. And the range of options, tailored to companies based on their industries and potential growth, can be dizzying if you’re new to the game.
Many small business owners will start with a personal loan from a bank, raising their home or car as collateral. Some will seek funding from friends or family to pursue their dreams. Others will sell ownership shares in the business for big bucks that will help them rapidly expand their workforce and production.
For people who do not have easy access to loans or lenders, programs for low income entrepreneurs or business owners of color offer low or no interest loans and even grants to people pursuing business. new businesses.
In addition to financial assistance, several Utah organizations also provide resources – from help developing a business plan to advice on how to grow your already successful business.
Here are some financial tips to help you start your startup:
Check your own pockets first
Many potential business ventures look to their own resources first. It could be anything from equipment an entrepreneur already has to money in checking or savings accounts.
Daniel Ortiz launched Details R Us in West Valley City after her sister offered to loan her an industrial steamboat. He had a background with cars, so he started cleaning and detailing vehicles.
“The opportunity arose,” Ortiz said, “and I took it.”
With the steamboat, he used the money from his coronavirus stimulus check to buy cleaning supplies. He also made an agreement with AMF Collision to run his business from this store.
Self-financing allows business owners to maintain full control of their operations. There are risks, however, especially for homeowners who withdraw money from their savings or retirement accounts. If the business fails, the owner will not be able to get that money back.
Hit the bank
A traditional way to start a business starts with the bank.
Some small business owners take out a second mortgage or use their cars as collateral to get the capital they need.
Banks will look at a business owner’s “five Cs” of credit, said Yrene Luque, director of Zions Bank’s business resource center. Those are:
• Character, or industry experience of the business owner and personal credit history.
• The ability, or ability of the business to earn the money needed to repay a loan.
• Capital, or the amount of money or equity that the business owner has invested in the business.
• Collateral, or assets that the bank could collect if a loan is not repaid.
• Local economic conditions or climate, demand for the business, industry trends and other factors.
Banks can lend in various ways, including through Small Business Administration Loans, business credit cards and loans specifically for the purchase of equipment, Luque said.
Zions Business Resource Center also offers consulting services to help clients find the right financing and develop business plans.
Turn to the Internet
Other entrepreneurs may ask friends and family for loans or investments, but the internet has given birth to another way to raise funds: crowdfunding.
Inventors and entrepreneurs can post their ideas and prototypes on these websites, and ordinary people can funnel money into the business to put it into production. In exchange for the funds, contributors can get early releases of products or discounts on items.
Note: Since these websites are businesses themselves, they take a share of the funds raised.
Look for a lot of money from “angel” investors
Venture capital and equity investments are another type of finance beast and are often used by companies looking to grow quickly, especially technology companies.
Venture capital firms or angel investors, which are individuals who invest at a high level, play a game of high risk and high reward when they inject money into new businesses.
By investing tens of thousands to millions of dollars in a business for a percentage of ownership, venture capitalists and angel investors hope to earn much, much more in return when that startup sells or goes public. Even if many startups fail, the profits of those that explode can make up for those losses.
And with the money investors invest in these companies, they can hire more people, buy more equipment, rent new office space, and more without going into debt.
Who else can help?
Salt Lake Community College Mill offers resources to help students and community members, whether it’s someone starting an ice cream shop or businesses looking to become the next big tech sensation. Business owners – or those who are just thinking of a startup – can speak with advisors, attend workshops, or sign up for office space.
Over 100 entrepreneurs have worked with plant manager Jon Beutler as part of SLCC’s Everyday Entrepreneur program.
“They have all the attributes of an entrepreneur,” Beutler said of his students and other business owners at The Mill. “They’re tenacious, they work their butt, and they work better, faster, harder.”
Beto Conejo, a SLCC student who took the Everyday Entrepreneur course, started developing a business plan through The Mill to try and make a living from his artistic skills. He said he dropped out of all of his classes last semester with the exception of the entrepreneurship course to focus on how it could build his career as an artist.
“I invest in my art,” Conejo said. “If I took this course I could concentrate [my business plan] on my art and develop something from there.
Since working with The Mill and doing the market research he learned there, Conejo has landed work creating live artwork at events and orders for other works of art.
The factory is currently giving grants of $ 5,000 to $ 10,000 to new businesses, but will likely turn that into a more sustainable revolving loan program. When low interest or interest free loans are repaid, a new loan can be given to another business to help get it started.
“We’re not doing this to make money,” Beutler said. “We are doing this to help small business owners.
Zions’ Business Resource Center also offers advice on business plans and marketing projections as well as expertise in financial guidance.
Business owners and potential entrepreneurs can speak with a consultant for free, Luque said, whether they are clients of the bank or not.
Other help options include the Utah Women’s Business Center, Suazo Business Center, Utah Veterans Affairs Center, and the Business Resource Center at Davis Technical College.