This story is part of The Salt Lake Tribune’s ongoing commitment to identify solutions to Utah’s biggest challenges through the work of the Innovation Lab.
You have what you’re convinced is a brilliant idea for a new business. Maybe you want to roll out a food truck that serves mouthwatering family favorites. Maybe you can picture a tutoring service that will help even the most-challenged students earn a high school diploma. Or maybe, with visions of Bill Gates dancing in your brain, you have developed a computer program that could rival Microsoft.
Trouble is, to make money, you need to spend money — and, right now, you don’t have money to spend. So how do you get the cash to cash in on your idea?
Well, there isn’t one way to finance a commercial endeavor. And the array of options, tailored to businesses based on their industries and potential growth, can be dizzying if you’re new to the game.
Many small-business owners will start with a personal loan from a bank, leveraging their house or car as collateral. Some will seek funding from friends or family to pursue their dreams. Others will sell ownership stakes in the business to get big bucks that help them quickly expand their staffing and production.
For people without easy access to loans or financial backers, programs for low-income entrepreneurs or business owners of color provide low- to no-interest loans and even grants to people pursuing new ventures.
Along with financial help, several Utah organizations also provide resources — from assistance developing a business plan to tips on how to grow your already successful business.
So here are financial tips to help you get started on your startup:
Check your own pockets first
Many prospective business ventures first look to their own resources. These can be anything from equipment that an entrepreneur already owns to money in checking or savings accounts.
Daniel Ortiz launched Details R Us in West Valley City after his sister offered to loan him an industrial steamer. He had a background with cars, so he began cleaning and detailing vehicles.
“The opportunity came across,” Ortiz said, “and I seized it.”
Along with the steamer, he used money from his coronavirus stimulus check to buy cleaning supplies. He also made a deal with AMF Collision to run his business out of that shop.
Self-funding lets business owners keep full control over their operations. There are risks, though, particularly for owners who take money out of their savings or retirement accounts. If the business fails, the owner won’t be able to recoup that cash.
Hit up the bank
A traditional way of starting a business begins at the bank.
Some small-business owners take out a second mortgage or use their cars as collateral to get the needed capital.
Banks will examine a business owner’s “five C’s” of credit, Zions Bank Business Resource Center manager Yrene Luque said. Those are:
• Character, or the business owner’s industry experience and personal credit history.
• Capacity, or the ability for the business to earn the money needed to pay back a loan.
• Capital, or the amount of money or equity the business owner put into the business.
• Collateral, or the assets the bank could collect if a loan isn’t repaid.
• Conditions, or the local economic climate, demand for the business, industry trends and other factors.
Banks can lend in a variety of ways, including through Small Business Administration loans, business credit cards and loans specifically for equipment purchases, Luque said.
Zions’ Business Resource Center also offers consultation services to help clients find the right financing and build business plans.
Turn to the internet
Other entrepreneurs may ask for loans or investments from friends and family, but the internet gave rise to another way to raise money: crowdfunding.
Inventors and entrepreneurs can post their ideas and prototypes on these websites, and everyday people can funnel money toward the company to get it into production. In exchange for the funds, backers can get early releases of products or discounts toward items.
Note: Because these websites are businesses themselves, they take a cut of the funds raised.
Seek big money from ‘angel’ investors
Venture capital and equity investments are another type of funding beast and are often used by businesses looking to grow rapidly — particularly technology companies.
Venture capital firms or “angel” investors, who are individuals putting up high-dollar investments, play a game of high risk, high reward when pumping money into new companies.
By investing tens of thousands to millions of dollars in a company for an ownership percentage, venture capital firms and angel investors hope to make much, much more in return when that startup sells or lists on the public stock market. Even though many startups fizzle, the profits from the ones that boom can make up for those losses.
And with the money the investors put into these companies, they can hire more employees, buy more equipment, lease new offices and more without running up loan debts.
Who else can help?
The Mill at Salt Lake Community College offers resources to help students and community members — whether it’s someone starting an ice cream shop to businesses looking to be the next big tech sensation. Business owners — or those just thinking about a startup — can talk with advisers, participate in workshops or sign up for office space.
More than 100 entrepreneurs have worked with Mill Director Jon Beutler through SLCC’s Everyday Entrepreneur Program.
“They have all the attributes of an entrepreneur,” Beutler said of his students and other business owners at The Mill. “They’re tenacious, they work their butts off, and they’re working better, faster, stronger.”
Beto Conejo, an SLCC student who took the Everyday Entrepreneur class, began developing a business plan through The Mill to try to make a living off of his artistic skills. He said he dropped all of his classes last semester except for the entrepreneurship class to focus on how that could build his career as an artist.
“I’m investing in my art,” Conejo said. “If I took this class, I could focus [my business plan] on my art and develop something from there.”
Since working with The Mill and doing the market research he learned about there, Conejo has landed work creating art pieces live at events and commissions for other art.
The Mill currently awards grants of $5,000 to $10,000 to new companies but will likely change that into a more sustainable revolving loan program. When low- or no-interest loans are paid back, a new loan could be made to another company to help it get off the ground.
“We’re not doing this to make money,” Beutler said. “We’re doing this to help small-business owners.”
Zions’ Business Resource Center also offers advice on business plans and marketing projections along with its expertise with financial guidance.
Business owners and prospective entrepreneurs can speak with a consultant for free, Luque said, whether they are bank customers or not.
Other options for help include the Women’s Business Center of Utah, Suazo Business Center, Utah Veterans Business Center, and the Business Resource Center at Davis Technical College.