An increasing number of business plan competitions are held across the United States. Many of these competitions offer cash prizes. The number of small business contests sponsored by companies that sell products to small businesses is also increasing. An example is the VISA Business Breakthrough Contest, a joint venture between VISA and MSN, which in 2007 offered five $10,000 awards to businesses that submitted essays explaining how they became more efficient in one of five categories (finance, marketing, organization, team building, and technology).^[1] A simple Google search using the keywords “small business contests” will produce similar examples.

Many state and community not-for-profit organizations and governmental agencies sponsor loan programs designed to encourage and support business ownership. An example is the Vermont Community Loan Fund, which is a fund that provides loans to businesses that help revitalize struggling communities in Vermont and provide jobs to low-to-moderate-income Vermonters.^[2] A similar example is the First Community Loan Fund in Delaware. The fund is a not-for-profit Community Development Financial Institution (CDFI) that specializes in supporting small businesses, micro-enterprises, and affordable housing in the State of Delaware.^[3] The best way to find if there are equivalent programs in your state is to check with your local Small Business Development Center or your state Department of Commerce.

The Patriot Express Pilot Loan Initiative is a program sponsored by the Small Business Administration (SBA) to help veterans and members of the military community gain access to the resources needed to start a business. It’s the only program sponsored by the SBA that targets a specific group of people. Similar to the SBA Guaranteed Loan Program discussed in Truth 24, “Persistence pays off: Finding alternative sources of start-up funds,” the initiative does not lend money directly to veterans but makes it easier for veterans to obtain financing by guaranteeing loans offered by the SBA’s network of participating lenders. It features the SBA’s lowest interest rates for guaranteed business loans. The program extends to spouses of active duty military personnel and the widowed spouses of service members who died during service or of a service-connected disability.^[4]

There are a growing number of business assistance programs that target women and minority business owners. For example, the Minority Business Development Agency (MBDA) is a federal agency created specifically to foster the establishment and growth of minority-owned businesses. MBDA provides funding for Minority Business Development Centers, Native American Business Development Centers, and Business Resource Centers located throughout the United States. While these centers are not a direct source of start-up funds, they provide assistance in many areas and help minority-owned businesses seek financing through a variety of channels.^[5] An example of an organization set up to invest money in minority businesses is the Minority Angel Investor Network (MAIN). It is a network of accredited investors with an interest and commitment to invest in high-growth, minority-owned, or minority-led companies. The organization’s focus is on businesses in the greater Philadelphia, Pennsylvania area.^[6]

Customers and suppliers are an often-overlooked source of start-up financing. Sometimes suppliers, if they recognize that your business has the potential to become a regular customer, will provide your business financing or funding to help it get off the ground. Similarly, if you feel that your product or service will add considerable value for a particular customer and save the customer money, the customer might be willing to prepurchase a certain amount of the product, which is a way for you to generate start-up funds. If you’re buying a franchise, you can typically obtain financing through your franchisor.

There are also ways that business owners tap into personal funds to raise start-up capital, beyond using savings and cash on hand. Examples include borrowing against the cash value of a life insurance policy and tapping into an IRA, 401K, or similar retirement account. You’ll normally need guidance and advice from a tax accountant to draw funds from a tax-deferred retirement account to finance a business venture.