Fund Your Business

Learn more about key resources in the startup and small business funding world. 

There are many options for funding that are close to home, regardless of your location. Here are a few different options that are around the nation. 

 

Community Development Financial Institutions (CDFIs)

Definition: CDFIs are private financial institutions that are 100% dedicated to delivering responsible, affordable lending to help low-income, low-wealth, and other disadvantaged people and communities join the economic mainstream. CDFIs can be banks, credit unions, loan funds, microloan funds, or venture capital providers. They aim to foster economic opportunity and revitalize neighborhoods. CDFIs are often supported by the U.S. Treasury Department and can be crucial for entrepreneurs who may not qualify for traditional financing.

 

Community Development Entity (CDE)

Definition: A CDE is a domestic corporation or partnership that functions as an intermediary vehicle for the provision of loans, investments, or financial counseling in low-income communities. The primary mission of a CDE is to spur economic growth and opportunity in these areas. CDEs are certified by the Community Development Financial Institutions Fund at the U.S. Treasury Department. They are also known for managing New Markets Tax Credit (NMTC) programs, which provide tax credit incentives to investors for equity investments in certified CDEs.

 

Revolving Loan Funds (RLFs)

Definition: RLFs are self-replenishing pools of money that provide flexible and affordable loans to develop and enhance local economies. They are typically created with grant funds from the government or private entities. RLFs lend to businesses and use the interest earned and the principal repaid to fund new loans. They are an important tool for economic development and can assist a wide range of business activities including start-ups, expansions, and retention efforts, often in under-served or economically distressed communities.

 

You can find your local organizations on the Treasury Department's search tool. 

Investors will provide starups with cash in exchange for equity in the business. It can be a great way to quickly raise capital. 

 

Angel Investor

Definition: An angel investor is an affluent individual who provides capital for a business startup, usually in exchange for convertible debt or ownership equity. Angel investors typically step in after the initial "seed" funding round and before the venture capitalists. They are often retired entrepreneurs or executives, who may be interested in angel investing for reasons that go beyond pure monetary return. These include wanting to keep abreast of current developments in a particular business arena, mentoring another generation of entrepreneurs, or making use of their experience and networks on a less than full-time basis. Angel investors can be crucial in the early stages of a startup's growth.

Find an angel in Montana here. 

 

Venture Capital

Definition: Venture capital (VC) is a form of private equity and a type of financing that investors provide to startup companies and small businesses that are believed to have long-term growth potential. Venture capital generally comes from well-off investors, investment banks, and any other financial institutions. Unlike angel investors, who typically invest their own funds, venture capitalists invest other people's money, pooled from various sources. They usually take a hands-on approach, requiring a seat on the board of directors and assurance of transparency. Venture capital is a vital source of funding for startups that do not have access to capital markets.

There are many options for venture funding in Montana:

 

Both equity and non-equity crowdfunding have democratized access to capital for entrepreneurs, allowing them to reach a wide audience of potential backers. However, they come with different levels of regulatory requirements, financial implications, and risks, both for the entrepreneur and the investors or backers.

 

Equity Crowdfunding

Definition: Equity crowdfunding involves raising capital from the public, where investors receive shares of the company in exchange for their investment. This means that investors become shareholders and own a portion of the company. The investment is typically made through online platforms. Equity crowdfunding is particularly attractive for startups and small businesses seeking capital to grow, while also willing to give up a portion of ownership. Investors in equity crowdfunding campaigns have the potential for financial return if the company succeeds, but they also bear the risk of losing their investment if the company fails.

Non-Equity Crowdfunding

Definition: Non-equity crowdfunding, also known as reward-based crowdfunding, is a method where individuals contribute to a project or business in exchange for a tangible reward or product, rather than equity. Popular platforms for this type of crowdfunding include Kickstarter and Indiegogo. Rewards can range from the finished product the campaign is raising money to produce, to a variety of other rewards depending on the contribution level. Non-equity crowdfunding is particularly popular among creative projects, inventions, and product-based businesses. It allows entrepreneurs to raise funds without giving up ownership or equity, but it requires delivering on the promised rewards to contributors.

Check out the Small Business Association (SBA) in your state. The SBA works with many banking institutions across the country in local communities. Check-in with your state's SBA for information on banking as well as on CDFIs or CDEs.

 

Check-in with your state (or community's) banking association. They may have a list of active members who are leaders in commercial/business banking.

The Small Business Innovation Research (SBIR) program, the Small Business Technology Transfer (STTR) program, and USDA grants are significant sources of funding for innovation and research in small businesses:

SBIR (Small Business Innovation Research) Program

Description: The SBIR program is a highly competitive program that encourages domestic small businesses to engage in Federal Research/Research and Development (R&D) with the potential for commercialization. Funded by various government agencies, the program aims to stimulate technological innovation, meet federal research and development needs, and increase private-sector commercialization of innovations derived from federal R&D. It's an excellent opportunity for small businesses to explore their technological potential and provides incentives to profit from its commercialization.

STTR (Small Business Technology Transfer) Program

Description: The STTR program, similar to SBIR, focuses on funding cooperative R&D partnerships between small businesses and research institutions, like universities or federal laboratories. The primary objective is to bridge the gap between performance of basic science and commercialization of resulting innovations. This program mandates the small business to formally collaborate with a research institution in Phase I and Phase II, fostering a more effective transfer of technology from research institutions to the commercial market.

Learn more about SBIR and STTR grants here. 

 

USDA Grants

Description: The United States Department of Agriculture (USDA) offers various grant programs designed to stimulate economic growth in rural areas, improve the quality of life, and support agricultural research and development. These grants cater to a wide range of projects, including agricultural research, farm and business development, conservation, and community infrastructure improvements. USDA grants are crucial for businesses and organizations involved in agriculture, food production, and rural development, providing necessary funds without the need for repayment.

Learn more about USDA grants here. 

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