Funding is elusive but available, if you know where to look
4) 401(k) plan It’s still a new strategy, but some business owners can cash in their retire‑
ment savings and use the proceeds to fund or start a business.
“This is something I’m just starting to hear about, but there’s a whole population out there of unemployed – the white shirt, tie and jacket populations – who have that available to them,” Glowacki said.
It’s a big risk, though, because if the business fails or doesn’t produce the revenue expected, the owners are out the money that was supposed to last them the rest of their lives, Glowacki said.
Also, if business owners are under 591/2 years old, they’ll pay an early withdrawal enalty for removing the money and have to ay tax on the income.
5) Home equity loans The number of lenders has dwindled and the amount of money a homeowner can
get has shrunk, but Goldmacher said home equity loans are still a good way for business owners to get much-needed cash.
But they’ll have to be in good credit standing, have considerable equity in their house and must find a lender willing to make the loan. Most banks will now only make a home equity loan if both mortgages together represent less than 75 percent of the value of the house. That could be challenging considering the recent drop in housing values.
One alternative, however, is a loan made by the LIDC. The organization offers second mortgages to be used by businesses to buy a new facility or fund projects.
6) Friends and family If all else fails, businesses can always ask Mom and Dad for help. But don’t be surprised if parents don’t just hand over the money.
Glowacki said family and friends now want to see a business plan and a strategy for repaying the loan.
“It’s becoming a much more formal process,” she added.
7) Personal credit cards Business experts cringe when small companies use credit cards to fund their operations, but when money is tight, it’salways a last resort.
“The sad truth is a lot of people use their credit cards,” Goldmacher said. “Obviously it’s not a good way to go, but if you have no choice, it’s an option.”
Glowacki said it’s not happening as much, but she’s still advocating that every business avoid high-interest credit card debt.
7.5) Small banks and credit unions
Businesses can’t always avoid the bank when they need a loan, but experts said if they go the banking route, the local institutions are the most lenient.
In fact, most local banks and credit unions have their doors wide open waiting for lending opportunities. They’re even more apt to lend if they’re an SBA lender, so they can pass some risk onto the government, Glowacki said.
It’s an area big banks have all but exited.
“The top of the list for SBA lending on Long Island used to always be Bank of America, but now suddenly it’s not,” Glowacki said.
Actually, Bank of America made 18 SBA loans on Long Island from October 2007 to February 2008, but has yet to make any during that time period this year.
Now, Great Neck-based Commu National Bank is at the top in terms of lars, with $2.8 million so far this year.
Experts said they’re now more c using a combination of these alternative lending sources when helping their s business clients get the funding they n If one source won’t make the whole I they can often get little bits from different places.
And some alternative funding does I its perks for the business borrowers. CDC, for example, offers business tray along with its loan program to help developing documents such as financial statements, business plans and market strategies.
Norman, who is now screening apply for his new staff, said he’s thrilled he d use a bank to start his company because learned business skills from the CD( would have otherwise lacked.
And he said the CDC helped get his n out there and connect him with other I nesses in his area.
“They’re very practical in making you use the funds right like a guide, said. “They’ll still call just to ask if e thing’s OK.”