Keep your Business Healthy With The Right Funding

Jennifer McCluskey

Having access to the correct type of funding stream at the right time can be very important for keeping your business healthy. Even if you don’t need funding right now, a great regular health habit for your business is developing and maintaining a solid relationship with your bank. When you find that your business is ready for additional capital to be able to grow, you have several options: 

Loans vs. Lines of Credit 

    There are several differences between loans and lines of credit. A loan is usually a large chunk of money that is given to you by the bank to buy something specific, for which you repay principal and interest for a set time period. Loans are usually best for larger purchases like land, buildings, larger equipment, etc. When starting a business, working capital (A.K.A money to start and keep your business going for the first few months) can be built into a business loan, too. 

    A line of credit can be more useful when a shorter repayment term is anticipated. For instance, if a lawn care business needs equipment in the spring and knows they will make enough money in the summer to pay the equipment off, a line of credit might be a good idea. Or another example is if a business is doing a project for a government entity, often the business will not be paid for the project until 30 or 60 days after completion. In that case, the business could use a line of credit to cover materials, supplies, and salaries until the bill from the government entity is paid. Usually, a loan is for something specific, while a line of credit can be for pretty much anything the business owner needs, once it is set up. Another useful thing about a line of credit is that it is a revolving account that lets the borrowers draw, repay and redraw from available funds throughout the life of the line of credit. Payment and interest will only be due on the amount spent. Lines of credit will likely have a higher interest rate, however, and may be harder to get if the business owner does not have good credit or less solid performance. There often needs to be some collateral available to secure the line of credit. 

Other Types of Business Funding 

    You can seek a loan from your bank or from other banks in the area that do business lending, or there are alternative lending sources available. Sometimes your county or your town will have a loan or grant program, so it’s always worthwhile to stop by your local economic development office or SBDC to find out what funding options are available to you in your county. Contrary to popular belief there are not many grants available, and those that are often have stringent requirements like job creation. Most grants available for business owners in our area are obtained by municipalities from the state and are administered on the local level. There are a few others, such as ACCES-VR’s small grant program for people with disabilities to start a business, and larger government SBIR and STTR programs for tech companies. In St. Lawrence and Jefferson counties, there are also some small grants for artists through the SLC Arts Council. 

    Some kinds of businesses, specifically those that are scalable and may involve a patentable product or service, may be of interest to an investor. Local investment groups will usually need a business plan as well as a pitch presentation. Obtaining this kind of funding can be a challenge, but rewarding. Similar kinds of businesses, like those that have a fun product or are in the tech arena, may be able to get some funding through crowd funding, but that requires a very strong marketing strategy and the right kind of product. Loans and lines of credit have a broader application and are (relatively) easier to get. 

    If you are looking for funding for your business and would like to learn more, contact the SUNY Canton SBDC at (315) 386-7312, SUNY Canton SBDC at Clinton Community College at (518) 324-7232, or the Watertown SBDC at JCC (315) 782-9262 for free business counseling.