Financing & Incentive Guide
Various programs and lenders in New Jersey are available to help you raise startup capital or obtain a loan for your business. You can explore them through the Business Action Center's financing and incentives guide at the link below.
Get Financing from Alternative Lenders
Non-profit and community lenders are one option for obtaining loans. Many of these lenders are mission-driven, meaning they have community or social goals to support low-income communities, and therefore may have fewer restrictions than traditional banks when making lending decisions. Examples of community lenders include community development finance institutions (CDFIs) and some credit unions.
These loans are usually smaller or have fixed interest rates so that borrowers are less likely to default (fail to repay their loan). In addition to providing loans, many of these lenders also provide services like training or technical assistance.
Do your due diligence when finding a suitable lender. Many for profit lenders specialize in making short term small business loans, but at extremely high interest rates. These predatory loans can affect your ability to meet your other obligations, so it is essential that you understand the terms and conditions of the loan and how it will impact your cash flow. Getting the short-term financing you need, only to realize the obligations of the loan, will cripple your ability to meet your other financial obligations and can quickly turn into a devastating mistake.
For more information on alternative lenders, call us at 1-800-Jersey-7 or chat with us.
Bank loans are one of the most traditional ways to finance a business. Unfortunately, they’re also some of the hardest loans to get approved for due to their stricter requirements such as having an alternate source of income, stellar credit, or being able to provide significant collateral. Have a great business plan to support your case, be persistent, shop around for the lowest interest rate, and keep in mind that you can also try other avenues, such as CDFIs.
Talk to a few banks to learn about their requirements and expectations before you count on bank loans as a source of financing for your business.
Lending organizations, such as the Economic Development Authority or the US Small Business Administration Lending Partners, may be helpful for those businesses that do not qualify form more traditional (Bank) lending.
Your investors might be people you know such as friends, relatives, and colleagues. Otherwise, an investment in your business could take the form of venture capital, which comes from individuals (often called angel investors) or venture capital firms who invest in businesses that they think are promising. Angel investors will often provide capital and mentoring in exchange for equity in the business, and may require certain conditions such as influencing how to run the company.
If you receive money from friends or family, it's always a good idea to have the terms in writing to avoid future challenges or legal issues. If the money is a gift and not a loan, keep in mind that you may need to report and pay a gift tax to the IRS.
Peer-to-peer Lending / Crowdfunding
Peer-to-peer lending, also known as crowdfunding, is an alternative funding model in which individual investors provide small sums as personal loans to individuals via Internet platforms. Crowdfunding is a way for businesses to raise money not only from friends and family, but also the general public. There are a number of online crowdfunding platforms where you request a certain amount of money to start or grow your business. People often are interested in supporting small businesses and start-ups, and can use crowdfunding to lend their own money to you at low or no interest rates. Because of the highly social nature of crowdfunding, this method of raising money is also a great way to raise awareness of your business or product. Search for crowdfunding platforms online and choose the best one for you based on fees and campaign rules so that you can maximize your fundraising.