3 Online Tools To Find Funding

Whether you're trying to grow a business or start one, securing the money to do it can be overwhelming. From traditional bank loans to crowdfunding, there are now many options to consider. To determine which ones are best for you, here are three online tools to consider:

1. Intuit’s Loan Finder. Intuit, the financial software-maker headquartered in Mountain View, Calif., offers a free tool to discover funding options and loan experts to help you through the process.

When to use it: If you're not sure what your funding options are or how to prepare an application, consider this tool. Intuit will shop around your online loan application to 450 lenders, from banks to credit unions and micro-lenders to more alternative lending options. 

How it works: You submit a loan application and receive an instant “pre-approval” from interested lenders with rates and financing details. Loan amounts range from a few thousand dollars to several million. Once you decide on a lender, you have to submit additional information (think tax returns or financial statements) to officially apply for the loan. Final approval comes within 12 and 45 days. 

Be aware: You have to at least submit basic financial information before you will get any response as to what kind of loan you are eligible for.

Related: Small Businesses Suffer in States Hardest Hit By Housing Meltdown

2. Multifunding’s Banking Grades. The Broad Axe, Pa.-based business loan advisory firm, Multifunding, offers a free online tool that grades banks based on their small business lending. It calculates the percentage of a bank’s deposits that are going to small businesses. As guidance, Multifunding labels any loan less than $1 million as one that is likely going to a small business. To get an “A,” a bank has to use 25 percent or more of its domestic deposits to make loans to small businesses: there are 2,693 banks that have an “A” grade. 

When to use it: If you're set on applying for a traditional bank loan, this tool can help you identify a bank that has a track record of lending to small businesses. 

How it works: You can search for banks by zip code. Other than Texas and California, banks in the midwest reign supreme in small business lending: Minnesota, Iowa, Illinois, Missouri, Nebraska, Wisconsin, Kansas and Oklahoma were eight of the top ten states, ranked for having the most “A” banks.

Be aware: Multifunding's grading system is determined by the percentage of a banks' total deposits that go to small businesses. Because of the volume of deposits that they hold, the nation's largest banks are not predisposed to rank well on this list.

Related: Getting the Big Banks Back into Small-Business Lending (Video)

3. SoMoLend. This Web-based service matches entrepreneurs with investors in the same geographic area. SoMoLend, headquartered in Cincinnati, Ohio, targets small, upstart companies with up to 15 employees that are seeking loans between $100 to $1 million. Investors on SoMoLend run the gamut from banks to individuals. What's different about these investors is they are focused on businesses in their own communities.

When to use it: If your existing business has a dedicated fanbase in your community, or you primarily serve customers in your neighborhood, this option may suit you.

How It Works:  You have to complete an application, including financial information (both personal and business). SoMoLend then ranks your company based on risk – a rating of one to five stars – so investors can weigh their options. Risk is based on your personal credit score, your time in business and with managerial experience, and the amount of debt your company has as a percentage of income. Investors use a GPS location tracking system to identify businesses that are seeking funding nearby with SoMoLend. 

Be aware: You'll have to submit a lot of financials upfront, including personal tax information, credit score, business taxes, a profit and loss statement, and a valid Employer Identification Number. After that, you'll find out if you've been pre-approved for a loan. If you decide to accept a loan, SoMoLend charges a 2-percent fee. 

Related: 3 Rules for Successful Crowdfunding

Readers, what is the best resource you have used to find funding? 

Did you find this story helpful? YesNo Thanks for making Entrepreneur better for everyone.

Catherine Clifford is a staff writer at Entrepreneur.com. 

View the original article here

What Facebook's IPO Debacle Means for Startup Funding

Facebook defied expectations of a boffo IPO. But does its disastrous outcome spell doom for startups seeking funding? Not at all.

Facebook stock has lost 25% of its value since it went public May 18 at $38 a share. Investors took a look at its price/earnings ratio of 104 and decided that since its earnings had fallen 14% in the quarter before and General Motors had decided to pull its $10 million advertising account, Facebook was not worth $104 billion.

If its earnings grow at the 22% forecast over the next five years, the stock is worth $8 a share -- at May 29’s $28, that leaves plenty of money for short-sellers to scoop off the table.

And even though Facebook did not soar to $100 on its first day, venture-capital firms that invested early made billions in profit. Top-dog Accel Partners took in an estimated $1.8 billion that day. So there is even more money sloshing around Silicon Valley looking for a home in a rapidly growing start-up with a great chief executive.

Facebook’s busted IPO is at worst a cautionary tale for other companies that would aspire to an IPO. And the lesson is to set the offering price low enough so that investors in the IPO can make money after the first day of trading.

And following the busted Facebook IPO, two companies decided to pull their IPOs but two others are still on track. One of the on-track ones, Palo Alto Networks, offers a winning product in an attractive industry – and that’s what IPO investors want. The ones that postponed their IPOs -- Kayak and VKontakte -- may have realized that they are not yet ready to meet the higher standards that Facebook’s busted IPO has signaled, meaning a well-developed business model reflected in solid revenue and profit growth. (By the way, VKontakte's CEO recently delighted in watching people fight over the money-paper airplanes he tossed out his St. Petersberg office window.) 

Pricing even a hyped IPO low enough for investors to profit on the first day of trading can be done. In 2004, for example, Google went public at $80 and closed the day at $100. Thanks to triple-digit earnings growth, that was still a low price. Google ended 2004 at $196.

Related: What the SEC Crackdown on Secondary Markets Means for Startups

So how can your start-up get a piece of that cash? As I write in my forthcoming book, Hungry Start-up Strategy: Creating New Ventures with Limited Resources and Unlimited Vision, you must persuade a VC that your venture targets a market that’s small now but will get big fast. To do that you have to answer these four questions in the affirmative:

Can the start-up offer competitively superior customer value and generate revenues?Will rapidly growing technologies, business models, or social changes boost demand?Do potential customers have a big problem that no companies are solving?Are leading companies and technologists working to solve the problem?

What's more, you'll need to show that your company will dominate that market because you are a great CEO. To do that you must persuade the VC that you:

Have superior industry knowledge and a compelling vision for your start-up’s future.Have a winning track record and the passion to keep winning.Are smart, curious and a doer of frugal, fast experiments.Can identify and manage business risk.Have charisma, integrity and the ability to attract, hire and motivate top talent.

If you can do this, all you have to do is get a "warm introduction" to the VC -- through an intermediary who the VC trusts and who knows you well. Then you need to survive a rigorous screening process that gives you a two in 1,000 chance of winning a share of that VC cash.

Related: What Makes Facebook Worth So Much

Did you find this story helpful? YesNo Thanks for making Entrepreneur better for everyone.

View the original article here