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Best Sources of Funding for Mobile Groomer (Starting with the least expensive sources):

    * Government Grant
    * Cash from Savings
    * Home Equity
    * Traditional Business Loan  
    * Equipment loan
    * Equipment Lease
    * Angel or Equity Financing
    * Credit Cards

While the search for capital can be varied and frustrating there are many paths you can follow.  You should follow them all.  Some paths are better than others, some are better for certain situations. 

What we offer is access to lenders who fund businesses on their equipment.   There are two types: traditional equipment lending and lease to own.  Traditional equipment lending would require a down payment anywhere from 20 to 40 percent with the loan paid monthly for up to 60 months.  Lease to own would require no down payment and payments up to 60 months and then a final $1 payment to purchase the trailer from the lender at the end. 

These are considered "Off Balance Sheet Financing" deals and usually don't affect your ability to borrow money for your business from other sources.  Of course you should consult with and licensed accountant and an attorney regarding tax advantages and legal options available to you for your business. 

The first thing to do is to go to AnnualCreditReport.com and get a copy of your credit report and credit score.  If you find any errors in this report you should contact the credit agencies through the mail requesting that they make the necessary corrections.  There are many ways you can even remove negative information from your credit report through a dedicated campaign of letter writing.  Contact as for more info regarding how you can legally do this.

A credit score over 700 is very good.  If you have a score over 700 and no previous collections, late payments or recent bankruptcy you have a good opportunity to borrow.  If your score is over 650 you will probably be able to get an offer that is reasonable.  If your score is below 620 you will probably not be offered any loan or if you are it might be something in the 30-40 % APR range and you can expect to pay back double what you borrowed including interest.

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Getting access to funding when you need it is essential to both emerging and established businesses. So where can you find it? There are far more sources—which are far more accessible—than you may have imagined.

Asset Based Financing:

Bank and SBA Loans
Upside: Debt only
Downside: Can be hard to get; excessive paperwork

Banks Determine which bank in your community understands the type of company you have. Every six months or so, ask for an increase on your credit-card limit and on your line of credit. Each small increment is worth something.

SBA loans The Small Business Administration's (www.sba.gov) loans are federally guaranteed by the government and must be repaid. The lender is insured against a total loss, typically receiving 75% of the loan amount even if the borrower defaults. Therefore they're more likely to do riskier deals, which is good news for businesses with fewer than three years of operation.

SBA loans have eligibility guidelines. For instance, your company has to be for-profit, operate in the U.S., and be majority-owned by a U.S. citizen or permanent resident. The SBA will consider your cash flow, your detailed business plan that includes your exit strategy, two-year (or more) detailed monthly financial projections showing an upward revenue trend for your business, plus past tax returns (if you have any—this doesn't apply to brand new companies).

Every year, the SBA will want to see improved revenues and decreased debt. If revenues are cyclical, that's O.K., as long as they can see that your expenses have taken into account revenue fluctuations, and profitability targets remain stable. The bottom line is if you have cash flow and assets for collateral, you will likely get a loan from the SBA. If not, they probably won't take the risk. Again, this is yet another reason to have a solid relationship with your banker, who will help you fill out the extensive SBA loan paperwork and can serve as a co-lender, too.

Personal Loans, Unsecured Loans, Micro-Loans, Merchant Cash Advances, and Asset-Based Lending
Upside: Easy to get; fast cash
Downside: Many have high interest rates; personal loans carry relationship risks

Personal loans. Approximately $100 billion is informally invested in startups each year. Friends and family members alone provide over $60 billion, according to Babson College's studies on entrepreneurship. They key here is to have a formal financing agreement drawn up by an attorney, which makes it clear whether the financing is a loan, an equity investment, or a gift.

For a loan, the agreement will state the interest rate and payment terms. For an equity investment, it should state the percentage of ownership in the startup. If the startup succeeds and is sold or taken public, the equity investor can rest assured that he or she will be compensated. If it fails, the lender/investor can write off the loss against taxes.

Unsecured loans and micro-loans. I know of three great resources for unsecured business loans. TheSnapLoan.com's loan is based on stated income, credit score, debt-to-income ratio, and years in business. Prosper.com also provides unsecured loans based on credit score and debt-to-income ratio, except their loans are provided by individuals and based on an auction model (see BusinessWeek.com, Winter, 2006, "A Tale of Two Lenders"). Another site, Count-Me-In.org, offers unsecured micro-loans as well, but for women-run businesses only.

Merchant cash advances. This is also called credit-card receivable funding. Companies providing this service pay cash advances to businesses who meet certain qualifications based on their credit-card sales history. The business then repays the advance, plus a premium, via deductions on future credit-card sales. The advantage is the business receives cash quickly without having to put up any collateral. The disadvantage is that this industry isn't well regulated, so fees can be high. But this is an option if you can't secure funding from other sources.

Asset-based lending. This type of financing provides loans against accounts receivable via a traditional line of credit or factoring. With the former, the lender will review your accounts receivable and offer a credit line with an interest rate similar to a bank loan. With factoring, the lender will loan against an individual invoice. The lender may prefer a combination of purchase orders and invoices, since purchase orders state an intention to buy and invoices are issued when the sale is completed. For purchase-order financing, the lender will likely offer 50% to 60% of the amount of a purchase order, and you will have to prove that purchase orders ultimately become invoices.

Credit card financing can run you 20% interest, Factoring only charges 5% interest. If you're paying a 5% interest rate to the factoring company, you may want to offer your customers a discount on their invoices as an alternative. If your customer agrees to pay in 10 days in exchange for receiving a 2% discount on their invoice, you've saved the 3% difference you would have paid to the factoring company, assuming a 5% interest rate. And the savings are passed on to your customer.

Equipment-Lease Lines
Upside: Use rapidly depreciating items as collateral
Downside: Can be hard to get or have prohibitive terms

Leasing often makes a lot of sense for computer hardware, cars, trailers, and software—things that  have a high initial cost. A lease line enables you to buy the business equipment you need, using your purchases as collateral for this type of credit line. This is what we offer.

Equity Based Financing:

Venture Capital
Upside: Sophisticated financiers; have lots of money
Downside: Only some will add value; loss of control—meaning they can fire you

Venture capitalists (VCs) generally play many roles, including seeking companies to invest in, assisting in the development of new products or services for their portfolio companies, and adding value to those companies through active board participation. They take high risks by investing in ventures that haven't yet demonstrated success with the hope they will provide high returns. They typically have a very long-term view. The harsh reality is that VCs assume most startups will fail.

VCs carefully evaluate and screen both the technical and the business merits of the company. During this due diligence process, the VC will conduct research on the market potential, competition, references, financial analysis, and product assessment. Commercial, legal, and personal aspects of the company will be considered, too.

VC financing is very tough to get, and not necessary to build a strong business.

Angel Investment
Upside: Increasing amounts are available; money with fewer strings attached
Downside: Sophistication/contribution of investors varies widely

Angel investors are high net-worth individuals who may or may not be savvy in your particular product or industry. "Friends and family" investments can be considered angel financing. Angel investors often have a similar investment philosophy to VCs: They believe in the entrepreneur more than the actual product, so they place their bet on the person with the compelling idea. Investment may take the form of a loan that converts to stock, preferred stock, or convertible bonds. Rarely will the investment be in exchange for common stock.

Government Grants:

Government Grants
Upside: Free money!
Downside: Government bureaucracy

There are various types of government grants for small business innovation and research. The best thing to do is to check out the Web site www.grants.gov to learn more about grants for which you might be eligible. I'll just mention a few programs where you might start.

The Small Business Innovation Research (SBIR) program helps fund small businesses in research and development efforts that have potential for commercialization.

Other programs include the Small Business Technology Transfer Program, offered through the NIH, and programs offered via universities. For example, the University of California has a BioSTAR grant program which doubles the money an entrepreneur receives for a project.

Each grant will take about a year to write, submit, get approved, and get funded. If you have the patience, though, you will not only get free dollars but credibility and a pre-fab customer (the government) that will help you attract additional types of capital later.

Regardless of which financing method you choose, keep your options open. Rarely does it make sense to take on all of the financial risk alone.