Financing your new business venture is probably the most critical element - without capital it is difficult to grow your company. Depending on the type of company, there are a number of ways to finance your venture. These can range from grants (usually for science and technology-based companies) to banks (more traditional industries) to angel and venture financing.
Listed below are available financing options. They are not mutually exclusive. In fact, most likely, companies will use a number of these financing vehicals at different stages of their company growth.
One of the most solid ways of starting your business is by financing it yourself. Some really successful businesses started in gargages and kitchens. Only when sufficient funds were coming in, did increased expenditures take place. The business therefore spends no more than it earns and can often position itself to ride the ups and downs of a new venture without risk. For aditional assistance, please see our links in the "Helpful Links" section below.
SBIR (Small Business Innovation Grants)
The SBIR (Small Business Innovation Research) and STTR (Small Business Technology Transfer) programs, two competitively awarded, three-phase Federal Government programs, are designed to stimulate technological innovation and provide opportunities for small business. This dynamic teaming of the private and public sectors include joint venture opportunities for small businesses and the nation's premier nonprofit research institutions.
The SBIR program solicitations are issued by eleven Federal agencies, including the Department of Agriculture, the Department of Commerce, the Department of Defense, the Department of Education, the Department of Energy, the Department of Health and Human Services, the Department of Homeland Security, the Department of Transportation, the Environmental Protection Agency, the National Aeronautics and Space Administration, and the National Science Foundation. For more information about the SBIR program, visit http://www.sba.gov/sbir/indexsbir-sttr.html. In addition, Federal agencies maintain department-specific SBIR and STTR programs Web pages.
CEROS (Center of Excellence for Research in Ocean Sciences)
The CEROS Program was created under a initial $5 million grant provided by the Defense Advanced Research Projects Agency (DARPA) in 1993. CEROS seeks to advance innovative concepts and new approaches to technology while fully leveraging existing facilities and infrastructure in Hawai'i and demonstrating beneficial commercial utility for the Department of Defense (DoD).
CEROS solicits proposals through annual competitive Solicitations. All proposals are evaluated by an expert panel for technical merit, innovation, and value according to criteria published in the solicitations. The CEROS Research Advisory Board determines the best proposals based on critical evaluations. Since 1993, the CEROS Research Programs have funded a total of 206 projects at a value of over $76,67 million.
CEROS' mission is to support the Department of Defense technology requirements; encourage leading edge R&D in ocean sciences and technology in Hawai'i; foster use of ocean R&D facilities in Hawai'i; provide an interface between specialized small businesses with expertise in ocean related R&D and DoD users of advanced technology; and develop avenues to ocean science expertise and facilities at the University of Hawai'i (UH).
HTDC (Hawai'i Technology Development Corporation)
High Technology Development Corporation is a state agency established by the Hawai'i State Legislature in 1983 to facilitate the development and growth of Hawaii's commercial high technology industry. The State views high technology as an important driver in the diversification of Hawaii's economy and one that provides quality, high-paying jobs for Hawai'i residents.
HTDC offers a wide variety of business development programs and services to support Hawaii's growing technology industry. HTDC offers its programs and services statewide, providing assistance and resources to Hawaii's tech industry entrepreneurs, start-up companies, employers, jobseekers and more.
HTDV (Hawai'i Technology Development Venture)
HTDV is a project of the Pacific International Center For High Technology Research (PICHTR) and funded by the Office of Naval Research (ONR) that utilizes the capabilities of Hawai'i-based small businesses in performing high technology efforts related to current and future Department of Navy and Department of Defense programs. HTDV will create a Pacific regional center for commercialization of defense and homeland security technologies that would benefit small companies in Hawai'i. The results of the effort will be a stronger technology base in Hawai'i to meet technology requirements of the Department of Navy and Department of Defense.
Small Business Administration
If your business is like most startups, you're seeking somewhere between $5,000 and $50,000 to get it off the ground. Consider an SBA loan. The SBA provides credit guarantees to banks and other institutional lenders who provide loans to business owners. The credit guarantee enables banks to make loans that are somewhat more risky than they would otherwise make.
SBA Loan Features:
- Business loans guaranteed by the Federal government.
- Designed to provide longer-term financing to small businesses that may need longer repayment terms or other special considerations.
Below are a list of banks that provide Small Business Loans, which range depending on company background, credit, collateral, etc.
First Hawaiian Bank - If your business needs more financial resources and flexibility, consider applying for First Hawaiian's Business FirstLine or Business FirstLine Plus. These lines of credit have many valuable money-saving features. Financing equipment or working capital is easy and economical with Business FirstTerm. Loans can be either secured or unsecured and the interest rate can be fixed for the term of the loan.
Bank of Hawai'i - As an SBA preferred lender, Bank of Hawai'i continually ranks as one of the state's top lenders in helping small businesses obtain specialized financing. They're often the answer for new or growing businesses. If you own a small business, you may qualify for an SBA loan.
American Savings Bank - You have a small business, but have big plans for it. American Savings Bank wants to see you succeed, and we are ready to assist you with a small business loan. Recognized as one of the leading Small Business Administration (SBA) lenders in Hawai'i, we have the experience and flexibility to help you obtain the SBA financing you need. Whether you are purchasing equipment, upgrading facilities, or expanding your business, our banking experts can help you qualify for the SBA program that's right for you.
Central Pacific Bank - Central Pacific Bank is a preferred SBA lender. This enables us to obtain fast approval so you can get your business opened and on the road to success. We can also help you with government loan programs for which you may qualify. As an approved Preferred lender ("PLP"), Central Pacific has the authority to approve loans on behalf of the U.S. Small Business Administration. That means we can obtain quick approval of your loan application.
Hawai'i National Bank - Hawai'i National Bank is a closely held community bank which has earned a reputation for its excellent service to small businesses. The Bank opened its doors on September 19, 1960 and has been one of the keystone institutions of Hawai'i finance, providing a wide range of services to small business customers and individual account holders.
Pacific Rim Savings Bank - We offer the following commercial loans to qualified businesses: Commercial Mortgage, Commercial Construction, Executive Line Business Lines, Commercial Term Loans, SBA Loans, SBA 504 Loans, USDA Loans
7(a) Loan Program
This is the most basic and frequently used type of SBA loans. Its name comes from section 7(a) of the Small Business Act, which authorizes the Agency to provide business loans to American small businesses.
Eligibility requirements: repayment ability, good character, management capability, collateral and the owner's equity contribution are all important considerations in qualifying for a 7(a) Loan. The maximum loan amount is $2 million and all owners of 20% or more are required to personally guarantee SBA loans. SBA provides up to a 75% guaranty on 7(a) loans in excess of $150,000.
Credit and Assets
Whether or not you get a loan or line of credit may depend on a number of criteria:
- Your credit history and credit score. Build your credit score by taking out a small loan or obtaining a credit card and pay back the amounts you borrow within 30 days.
- Collateral that can be leveraged such as equity in a home or other property that would assure a personal guarantee of repayment.
- Your history and relationship with your bank. If you’ve had an account with your bank for many years and have kept a solid balance, that means something when being considered for a loan. Your bank will know if you have a history of paying your bills on time or if you are bouncing checks. Not only is a good record important but the relationship you have with bank personnel and your community can sometimes count for a lot. Get to know your local branch officers and manager. Let them in on your plans and get their advice.
Most banks will agree that the absolute best time to get a loan or a line of credit from a bank is when you don’t need one. Set up a revolving credit or apply for a personal loan before you need one. If you borrow against this loan, immediately pay it back thus establishing your credibility as a reliable borrower.
Angel/Venture Capital (VC) Funding
Hawai'i Association of Angels
Angel investors are high net-worth individuals who make equity investments in entrepreneurial businesses, and angel groups are formed when individuals join together to evaluate investment opportunities and invest together. Currently, there are about 265 angel groups operating in the United States and Canada, an increase of 67 percent since 1999.
By a considerable margin, the reporting angel groups prefer to invest in seed and start-up companies (80 percent) and early-stage firms (85 percent), than they do in expansion (22 percent) and later stage companies (5 percent). The groups expect little change to the stage of companies in which they will invest in 2007. Additionally, the groups also provided follow-on funding for their portfolio companies. An average of three of angel groups' 7.3 deals in 2006 were follow-on investments in portfolio companies.
Angel group leaders expressed interest in a wide variety of industries in the survey. Three industry areas were of particular interest:
- Medical Devices (89%)
- Software (85%)
- Biotechnology (67%)