New Business Startup Financing

Starting a new business is an exciting journey, but securing the necessary funding can often be one of the biggest hurdles. At Montgomery Lending, we believe in empowering entrepreneurs with the knowledge and connections to find the capital they need to turn their innovative ideas into thriving realities. Montgomery Lending can help, with our vast local network here in South Bend. Beyond traditional bank loans, a diverse ecosystem of funding options exists, including government-backed programs and invaluable local resources right here in South Bend.

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SBA Loans for Startups: Government-Backed Support

The U.S. Small Business Administration (SBA) doesn't directly lend money, but it guarantees a portion of loans made by commercial lenders, reducing risk for banks and making it easier for small businesses, including startups, to qualify for financing. SBA loans often come with more favorable terms than conventional loans.

Key Eligibility Requirements:

• For-Profit Operation: Your business must operate for profit.
• U.S. Based: Engaged in, or proposing to do business in, the United States or its territories.
• Small Business Definition: Meet the SBA's size standards, which vary by industry based on revenue or number of employees.
• Owner Equity: Have reasonable owner equity to invest in the business.
• Personal Guarantee: Owners with a 20% or greater stake in the business typically must provide a personal guarantee and may need to pledge personal assets as collateral.
• Demonstrate Need: Show that you've exhausted other financing options and clearly outline how loan proceeds will be used.
• Ability to Repay: Provide financial projections to demonstrate your capacity to repay the loan.

Benefits of SBA Loans for Startups:

• Longer Repayment Terms: Often extending up to 7-10 years for working capital and up to 25 years for real estate/equipment, leading to lower monthly payments.
• Lower Down Payments: Can be significantly less than conventional loans.
• Interest Rate Caps: The SBA limits the interest rate lenders can charge.
• No Balloon Payments: On amortizing loans, the SBA prohibits balloon or demand note structures.

SBA Lenders in South Bend: Many local banks participate in SBA programs. For instance, 1st Source Bank is an SBA Preferred Lender in the South Bend area, which can lead to quicker turnaround times for loan approvals as they can make decisions in-house.

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CDFI Loans: Investing in Community Growth

Community Development Financial Institutions (CDFIs) are mission-driven financial institutions that provide credit and financial services to underserved markets and populations. They are often more flexible than traditional banks and focus on community impact alongside financial returns, making them an excellent resource for startups and businesses in low-income or minority communities.

Types of CDFI Loans for Small Businesses:

• Working Capital Loans: For day-to-day operations, product development, marketing, or supplies. Terms typically 1 to 5 years.
• Equipment Loans: To purchase essential machinery, vehicles, or technology. Terms usually 1 to 10 years, depending on asset life.
• Real Estate Loans: For purchasing property (often requires the business to occupy a majority of the space). Terms can be 15-20+ years.
• Microenterprise Loans: Smaller loans often coupled with extensive technical assistance for very small businesses or self-employed individuals.

CDFI Resources in South Bend:

• CDFI Friendly South Bend: This organization connects local borrowers with CDFI lenders to meet capital needs. They offer a unique "Credit Builder" program which provides business coaching and an opportunity for a no-cost, $2,500, 12-month line of credit for entrepreneurs who complete specific startup activities (e.g., creating a business plan, opening a business bank account). This is ideal for building business credit history.
• Brightpoint Development Fund: While operating regionally, Brightpoint Development Fund is a CDFI that may offer various loans and support to businesses, including those in the South Bend area.

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Other Local South Bend Resources for Startup Funding & Support

South Bend Opportunity Fund:

• A City of South Bend program (administered by the Department of Community Investment) designed to support small businesses and entrepreneurs, providing access to capital and business coaching.
• It's a loan program (not a grant) with loans ranging from $1,000 to $30,000 under various repayment terms.
• Eligibility: Business (or startup) must be located and operating in South Bend, with prior year revenues less than $300,000.
• Process: Applicants must complete business coaching and a readiness assessment through the Indiana Small Business Development Center (ISBDC) before being referred to 1st Source Bank for loan consideration.

Entrepreneur Support & Advising:

• Indiana Small Business Development Center (ISBDC): Offers no-cost, confidential business advising and training. They are key partners in helping businesses become "loan ready" for programs like the South Bend Opportunity Fund.
• Momentum Entrepreneurship Hub: Provides coworking spaces, private offices, meeting rooms, and a community-driven ecosystem with resources, mentorship, and networking events for entrepreneurs and startups in the South Bend-Elkhart region.

University Resources:

• University of Notre Dame IDEA Center: A fundamental resource for commercialization and entrepreneurial activities, supporting idea development, business formation, prototyping, and student entrepreneurship. They also run the McCloskey New Venture Competition with significant prizes.
• Indiana University South Bend Center for Innovation & Entrepreneurship (CIE): Offers workshops, experiential learning, speaker series, and connects entrepreneurs to the local innovation ecosystem.

Accelerators & Incubators:

• gener8tor: An early-stage startup accelerator that provides access to mentors, investors, and other valuable resources for high-growth startups.
• Regional Innovation and Startup Education (RISE): Focuses on transforming individuals through entrepreneurial thought and immersion, fostering an entrepreneurial mindset.

Grants (Sector-Specific):

• While direct grants for general business startups are rare, some exist for specific purposes or industries. For instance, the READI (Regional Economic Acceleration and Development Initiative) Fund has supported large regional development and entrepreneurship projects in the South Bend-Elkhart region.
• Federal programs like SBIR (Small Business Innovation Research) and STTR (Small Business Technology Transfer) grants offer non-dilutive funding for small businesses engaged in R&D with commercial potential, often through government agencies like NIH or USDA.

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Take the Next Step

Securing startup funding can be a complex process, but with the right guidance and resources, your entrepreneurial vision can take flight. We encourage you to explore these avenues, prepare a robust business plan, and leverage the support systems available in South Bend.

Contact Montgomery Lending today to discuss your specific funding needs and how our vast local network can help connect you to the right solutions.

[email protected]