If you own a business, there will likely be a time when you ask yourself if you need capital to help your business grow and scale. Entrepreneurs ask themselves questions such as “Should I try to completely fund my business myself?” “Do I ask my friends and family to help me out?” “Do I need to go to the bank and get a small business loan?”
This can be especially true for startup and scale-up technology companies that are growing and scaling fast and need capital for real estate, product or equipment. Each company’s goals are unique, so while bootstrapping may work for one company, it might not be the best option for another.
Depending on your support system and the amount of money you need, many businesses apply for small business loans to finance their growth. This can come with its own set of challenges including higher interest rates and unaligned goals between the business and the bank. You’re focused on growing your business and the bank is focused on gaining the return on their investment, or they don’t have a clear understanding of your industry and your business objectives.
Steven Meyer, Executive Director of the King Park Development Corporation (King Park), understands the importance of helping entrepreneurs acquire the capital they need and how such success impacts the greater community. To help meet this need, King Park launched the Build Fund in July 2015 to attract economic development to underserved communities through a small business loan fund.
Through a grant provided by the City of Indianapolis in addition to other funding sources, the Build Fund offers small business loans designed for businesses that are not traditionally served by financial institutions. Examples include certain industries that banks aren’t familiar with, areas of the city that are difficult to invest in, or business owners who don’t meet a bank’s credit requirements.
New, relocating or expanding businesses that are creating new jobs and operate their business in underserved communities can apply for loans through the Build Fund. Today’s loan pool is around $3.5 million, and current loans have ranged between $75,000 to $950,000, with most falling between $150,000 and $300,000. Build Fund projects to date are businesses you’ve likely visited, such as Hotel Tango Whiskey Distillery, Cannon Ball Brewing Company, Ash & Elm Cider Company, R&B Architects, and Shoefly Public House.
The process for businesses is similar to that of applying for a bank loan. Operating businesses provide the past three years of financial statements for review, while new or not yet launched businesses share their business plans. That information is reviewed in person to discuss the business and get a better idea of what the money will be used for, the timeline of when the capital is needed, and how the loan should be structured.
The application then goes to a loan committee of commercial bankers and community advocates that review the social impact of the business. “We want to see the number of jobs the business plans to provide, and if those jobs are for low-income or work release individuals,” said Steven. “Those non-financial criteria, such as occupying an abandoned building, weigh in favor of the business. We look at a broad picture of what the investment could be.”
In total, the process could go as quickly as 45 days from start to finish.
“Our goal is to provide 10 to 15 loans per year, while focusing on industries where there is a demand for loan products that the Build Fund can handle,” said Steven. “There’s so much demand for this type of product in Indianapolis, but our current marketing efforts are all word of mouth. We’d like to diversify our portfolio and offer more loans to minority and women owned businesses, and other industries where there is a need for such capital.”
Steven Meyer concurs stating, “We are particularly interested in supporting businesses in industries like the technology sector that have a difficult time securing financing from traditional financial institutions.”
For more information about The Build Fund or to apply for a loan, visit https://buildfund.org/.