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Funding, Start-Up & Grants

All things start-up funding, getting scrappy, grant opportunities and ways to find funds for your business

 

Starting a business costs money. There is no two ways around it.

THE BEST WAY to fund a start up business is to do it yourself. 

There is no magic bullet for "funding" or easy money to fund your business. Just like there is no free lunch!

The best way to fund your business is be starting small, reinvesting what you earn and getting scrappy to spend less while working harder to make more. Grow your business as you grow without debt or anyone else in your business.

That said - there ARE some fantastic opportunities for grants and start-up or growth loans out there you should be all means look for and invest the time in an application!

 

I hear a lot of people tell me they are going to ask "Angel Investors" - but this only applies to big business.

Ronny Conway, founder of A Capital and a well known "Angel Investor" in Silicon Valley is a friend of mine and told me once that you should start small, build it yourself first, and only consider angel investor funding if you expect your company will be making a billion dollars in sales.

Angel Investors

What are your options for "funding"?

  • Your own savings - the best bet!
  • A bank loan with top-of-the-market interest
  • A private loan with bottom/middle-of-the-market interest
  • Credit cards (some will give you a few months before APR kicks in)
  • A home equity loan
  • an SBA loan (the Small Business Administration)
  • a USDA loan, favorable to farmer/ranchers
  • creative investing (ie Kickstarter or BarnRaiser)

All of these require some level of paying back, likely with interest or with some work to pay it back.

When you do start with some funding for your small business, no matter what it is, make sure you are very cautious with every dollar. If you do get a loan, an infusion of funds into your account can be very tempting to go big - don't do it!

Those dollars are the most volatile because each one needs to be paid back with interest. They should be spent with caution!

 

Creative Funding

There are also the crowd-funded based ways of raising money like KickStarter or Barnraiser. I really like Barnraiser as an option for the right situation. Again, there is no such thing as free or easy money - these campaigns are still going to require a lot of time, energy, resources and FULFILLMENT on your promises down the road. 

Basically, you create a project that tells your story, set a goal for funding to complete a specific project or goal, share with family and friends (Barnraiser may pick up a trending campaign and promote too) and in return for investment type donations you promise a "reward" like early release of one of your products the campaign is funding, a hand written letter of thanks, a t-shirt/swag, or an experience like a farm dinner or farm stay.

These campaigns are a great option for a lot of reasons - but need to be done tactfully and carefully to make sure expectations are well managed!

Crowdfunding sites:

  • Barnraiser - crowd-fund website specifically focused on the agricultural sector
  • Kickstarter- crowd-fund via pre-selling your products in any sector
  • Indiegogo- crowd-fund via donations with a focus on arts and creative projects, including some which aren't allowed on KickStarter

 

Loans & Grants

There are some options available in the form of loans or grants by the USDA.

Their website gives a good overview of what they can provide:

"By providing access to credit, FSA’s Farm Loan Programs offer opportunities to family-sized farmers and ranchers to:

  • Start, improve, expand, transition, market, and strengthen family farming and ranching operations
  • Beginning farmers, racial and ethnic minority farmers and women producers 
  • Value-added, direct sale, organic, and specialty crop operations
  • Young People actively involved in agricultural youth organizations needing financial assistance for income-producing, educational, agricultural projects
  • Urban farmers and roof-top producers
  • Operations using alternative farming methods such as hydroponics, aeroponics, vertical farming, and freight container farming

  Example Interest Rates  Program Interest Rates Farm Operating- Direct 4.000% Farm Operating - Microloan 4.000% Farm Ownership - Direct 4.250% Farm Ownership - Microloan 4.250% Farm Ownership - Direct, Joint Financing 2.500% Farm Ownership - Down Payment 1.500% Emergency Loan - Amount of Actual Loss 3.750%  


The USDA also offers Value Added Producer Grants (VAPG) which can be a very valuable incentive for a producer getting their "value add" product direct to consumers without a middle man.  These are usually matching funds and only available once a year in a competitive application process. If you are serious about applying for a VAPG Grant - it might make sense to hire a grant writer or firm who has experience in these programs.

Some more info on VAPG Grants from the USDA website:

What does this program do?

The Value Added Producer Grant (VAPG) program helps agricultural producers enter into value-added activities related to the processing and/or marketing of new products. The goals of this program are to generate new products, create and expand marketing opportunities, and increase producer income.

Applicants may receive priority if they are a beginning farmer or rancher, a socially-disadvantaged farmer or rancher (female), a small or medium-sized farm or ranch structured as a family farm, a farmer or rancher cooperative, or are proposing a mid-tier value chain.

Grants are awarded through a national competition. Each fiscal year, applications are requested through a notice published in the Federal Register and through an announcement posted on Grants.gov.

Program Funding: $18 million
Maximum Grant Amount: Planning Grants $75,000; Working Capital Grants: $250,000
Matching Funds Requirements: 50 percent of total project costs - or other creative paybacks

Who may apply for this program?

Independent producers, agricultural producer groups, farmer- or rancher-cooperatives, and majority-controlled producer-based business ventures, as defined in the program regulation are eligible to apply for this program.

How may funds be used?

Grant and matching funds can be used for planning activities or for working capital expenses related to producing and marketing a value-added agricultural product. Examples of planning activities include conducting feasibility studies and developing business plans for processing and marketing the proposed value-added product. Examples of working capital expenses include:

  • Processing costs
  • Marketing and advertising expenses
  • Some inventory and salary expenses

Who can answer questions?

If you have questions, you can contact your nearest Rural Development Office.

Will I need to send any reports if I receive a grant?

If you receive a grant, you will need to send regular financial and performance reports.  Your grant agreement will tell you how often you need to send the reports, what forms you need to use, and what information you need to put in the reports.

Where can I get more information? 

The VAPG program regulation contains details about the program’s purpose, what you can and can’t do with grant money, application requirements, and information about how applications will be selected for funding. Remember that you need to read the Federal Register notice to get all the details about how to apply, but the program regulation also has useful information that you will need before applying for a grant.

 

Organizations

Another resource can be local, state or national organizations whose mission is to promote your product like the

  • National Dairy Council
  • California Beef Council
  • National Pork Producers
  • American Lamb Board
    • As an example, there is an American Lamb grant application (attached in downloads!) for any producer raising lamb and getting it directly to American consumers. "Up to $25,000 is available to help support local or regional lamb promotions designed to build demand for American Lamb." 
  • FACT Fund-a-Farmer small grants for improved animal welfare
    • FACT awarded more than $66,000 in grants to 28 independent family farmers in 19 states across the country (read more about our 2018 grantees). Since 2012, FACT has awarded more than $261,360 in Fund-a-Farmer grants for projects that improve animal welfare (see a listing of all past funded projects). 
  • Other organizations have similar programs or grants if you ask! Look at what makes you unique or what your biggest needs are and seek out grant opportunities in those areas.

 

Other Resources

A lot of local Economic Development Corporations and or Business Incubators with can offer advice, mentorship or micro-loans.

I'd encourage you to do some research and get in touch with your county/regional programs to see if there might be options in your economic development groups.

For small businesses and entrepreneurs, these type of programs can be a great opportunity as they don’t have the general government hoops attached, like registering in SAM (System Award Management), lots of paperwork, etc.