OmarMuhammed

Omar Muhammad

“Shark Tank,” the television show where entrepreneurs go hoping to get a deal and money for their business offers a perspective of how to get money for your business. This is a guide for everyone who doesn’t make it on to the show.

Whether you are just starting out with an idea or growing a mature company, you need to understand what type of funding is right for you.  Here are some of the more common ways to fund a business.

Founder’s resources. Using your own cash (savings, paycheck, retirement, equity from your home, credit cards) is probably the most common way to fund your business.

Competitions/Grants. Business plan competitions can be found at colleges and universities, corporations that have a philanthropy arm, nonprofit organizations, state and local organizations. If you have some type of research, the federal government has a competitive grant through sbir.gov.

Loan. Going to a bank to obtain a loan is probably the second most popular way to fund a business.

Incubators and Accelerators. These organizations serve as a way to accelerate businesses growth. To find an incubator in the state of Maryland go to: incubatemaryland.org.

Crowdfunding. Web sites such as Kickstarter and IndieGoGo let members of the public give you funding based on your pitch. Here is a tool (http://bit.ly/crowdfundtool) to see if crowdfunding is right for you.

Angel investors.  Wealthy individuals willing to invest in a business for an equity stake.

Venture capital. Private organizations providing capital to businesses for a return.

Now that you have an idea of the type of funding available, let’s explore what lending institutions look at when considering a loan for your business.

Capital.  You putting some of your own money in the project tells lenders and investors that you believe in your idea/business.

Character. Do you or someone on your team have experience in the industry that you are doing business in? Have you or a team member operated a business or served in a management capacity? Lenders want to know the experience level of all key employees.

Capacity. How are you going to repay the loan? In most cases, cashflow from the business will repay the loan. If not, lenders want to know if you have the capacity to repay using other funds. Your personal and business credit relationships will be reviewed to see how you are currently making repayments.  This serves as a barometer for future obligations for lenders.

Collateral. Depending on the lending institution, you and your spouse may have to guarantee the loan. Depending on the lending institution, you may have to pledge assets including your home in case you are not able to repay the loan.

Conditions. What are the uses of funds? Don’t guess the amount of money you will need, do your homework.  Lenders will also look at the conditions of the industry. Gain an understanding of the industry that you are going into and how the current state of the economy may impact your business.

Check with your local bank to find out what their specific criteria are for obtaining a loan.   Other than banks, there are nontraditional lenders who have access to capital and/or assistance. Some of those in the Maryland area include:

Baltimore City Small Business Resource Center (sbrcbaltimore.com)

Baltimore County Small Business Resource Center (baltcountycc.com)

Meridian Management Group (mmggroup.com)

Maryland Capital Enterprise (marylandcapital.org)

Department of Housing & Community Development (bit.ly/dhcdloans)

Baltimore Community Lending (bclending.org)

TEDCO (tedco.md)

Small Business Development Center (sba.gov/tools/local-assistance/sbdc)

Entrepreneurial Development & Assistance Center (edacmorgan.com)

Omar S. Muhammad is an intrapreneur and director of the Entrepreneurial Development & Assistance Center (EDAC) at Morgan State University.  He also is engaged in entrepreneurship through his company CoolOpps.  He can be heard on WEAA every Sunday at 8 p.m. He can be reached at omarsmuhammad@gmail.com}