West Virginia Department of Commerce Financing Your Business

Recent Pages: Financing

Financing Your Business

Going Into Business in West Virginia


WILL YOU NEED TO BORROW MONEY? Much emphasis is placed on the importance of researching the feasibility of your proposed business and then planning for its operation. Of equal importance is whether outside financing is needed to get the business started or if financing can be acquired.

How Much Do You Need?
What Will the Lender Need to See From You?
What are the Sources Available?
Credit History

Too many entrepreneurs try to start and operate a business without enough money. Tragically, many small businesses fail each year because of insufficient funds. To avoid this dilemma analyze three questions:

  1. How much money do you have?
  2. How much money will you need to start your business?
  3. How much money will you need to stay in business?

A variety of funding sources exists to assist small businesses in the start-up phase and throughout their development and expansion. The following section examines the types of funding sources that are available to small business owners. For assistance in identifying the funding sources for which your business may be eligible or for additional information on any of the financing programs listed here, contact the Small Business Development Center.


Preparing a projected monthly cash-flow worksheet in the initial planning stages of the business is a good way to determine the amount of capital needed to establish and maintain your business. The cash-flow statement allows you to incorporate anticipated start-up expenses (as well as the requested loan amount) into the first year’s financial forecast to show a clearer picture of the company’s projected financial position.

The cash-flow statement is also useful in determining whether outside financing will be needed to start the business, and how much will be required. In most cases, revenues generated by a business in its initial months of operation are not enough to meet its debt obligations. Thus, additional “working capital” is needed to keep the business operating until revenues reach the break-even point, or a level at which sales can sustain business.

It is a good idea to request enough financing to cover all anticipated start-up costs, plus enough working capital to meet all monthly operating expenses, including the loan payment, for the first three to six months. The number of months of working capital needed will depend on the type of business you are starting. Keep in mind that the higher the loan amount, the higher the monthly payment.

To get some idea on how much money you will need, you should prepare a list of the things you’ll need for your business. Use the chart below to begin getting some figures together for how much it will cost to start your business and how you will use the money.

Download PDF
Download PDF

Review and complete a projected cash-flow worksheet and then take a look at your anticipated monthly expenditures for the business. Then look at your estimated monthly business income. Can you expect to generate enough revenue to cover the amount of money required to establish and maintain your business? If not, you may need to reconsider.

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Virtually all banks and the U.S. Small Business Administration (SBA) require a portion of the loan to be an equity injection from the owners of the business. This can vary depending on the type of business being contemplated as well as the strength of the entrepreneur. The remaining capital obtained generally is from a conventional lending institution, a private investor or from one of the alternative funding sources listed in the next section.

Regardless of what funding source is used, the lender typically will require some information from the prospective borrower concerning the proposed business. This information is examined carefully by the lending agency to assist in evaluating the loan request. Have a loan proposal prepared before approaching the lending agency so that you can make a strong first impression. Remember, the prospective lender will be evaluating not only your business idea, but you as a potential business owner.

When you meet with a lender, know exactly how much financing is needed, what terms are desired and how the money will be used. Additionally, it is wise to have the following information on hand:
  • Business plan (see Chapter 11, Business Planning: The Key to Your Success, in this book).
  • Business financial statements and tax returns for the last three years and interim financial statements within 90 days of being current (existing businesses only).
  • Projected income statement (for at least three years) by month.
  • Projected balance sheet (for at least one year).
  • Projected cash flow budget (for at least one year) by month.
  • Personal financial statement (dated within 90 days of the loan request).
  • Personal tax returns.
  • Listing of major equipment with written estimates.

Visit the SCORE web site and download the templates you need to create your financial information.

Many economic development professionals throughout West Virginia are available to assist you at no charge in developing the information required in the loan request. Contact an accountant or consult the SBDC.

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Personal assets and investments by family and friends provide a major share of financing — an average of 20 percent to 30 percent of all funds — for business start-ups. Formal business loans also play an important part in business financing, particularly for existing companies.

The following section lists some funding sources available to small business owners. Many funding programs, particularly low-interest loan pools, will finance only a portion of the total loan amount requested, or place restrictions on the types of businesses or uses for loan funds. Subsequently, business owners often combine one or more of the funding sources listed so at least some portion of the total loan amount is obtained at a lower interest rate, with the remaining capital secured from more conventional lending sources at the current market rate.

For more assistance in identifying the funding sources for which your business may be eligible, consult the SBDC.

Bank Financing
The primary source of funding for a small business is your local bank. It is the bank that initiates the guarantee process with state and federal agencies and it is the bank that is actually lending the money. Without the expertise and commitment to economic growth of the commercial bankers of West Virginia, businesses large or small would have extremely limited options for obtaining money for their business needs. Your local bank commercial loan officer will work closely with you in finding a source of funding that is appropriate for your financing needs, whether it is a direct loan from the bank itself or participation in a guarantee loan program with a state or federal agency. The loan officer also coordinates with the other sources of funding listed above to help you obtain your finances in a reasonable time period and at rates that are suitable for your business.

Whether you need financing for starting a business or expanding and improving an existing business, please contact your local commercial bank first for assistance with your lending needs.

Federal Financing
The government’s principal agency for small business lending is the SBA. It offers a variety of loan programs to eligible small businesses that cannot borrow on reasonable terms from conventional lenders without government help. The primary lending tool of SBA is the Guaranty Loan.

Due to the changing economic situation, for the latest information on SBA loan programs or any other loan program listed below, contact your local SBDC business coach. 

Small Business Administration
SBA provides a number of financial assistance programs for small businesses, including debt financing, surety bonds, and equity financing. Even though SBA does not loan money directly to small business owners, they play an important role for people who want to finance or grow their business. When you apply for a SBA-backed loan at your local bank or credit union, you are asking SBA to provide a guarantee that you will repay your loan as promised.

Guaranteed Loan Programs (Debt Financing)
SBA Guaranteed Loan Programs set the guidelines for loans made by its partners (lenders, community development organizations, and microlending institutions). The SBA guarantees that these loans will be repaid, thus eliminating some of the risk to the lending partners. So when a business applies for an SBA loan, it is actually applying for a commercial loan, structured according to SBA requirements with an SBA guaranty.

Financing programs include:

7(a) Loans
The 7(a) loan program is the backbone of the SBA financing programs. A borrower can receive up to $5 million gross with an 85% guaranty for loans of $150,000 or less and a 75% guaranty on amounts greater than $150,000; there is a $375 million maximum guaranty.

Eligible uses of funds include acquisition and expansion of assets such as land, building and equipment; working capital and more.

The SBAExpress program gives small business borrowers an accelerated turnaround time for SBA’s review. You will receive a response to your application within 36 hours. In addition, lower interest rates are often available to you when you apply through an Express program.

Patriot Express

The SBA’s Patriot Express Loan is for veterans and members of the military community wanting to establish or expand small businesses. Eligible military members include veterans; service-disabled veterans; active-duty service members eligible for the military’s Transition Assistance Program; Reservists and National Guard members; current spouses of any of the above and the widowed spouse of a service member or veteran who died during service or of a service-connected disability.

Loan proceeds can be used for most business purposes, including start up costs; equipment, businessoccupied real-estate and inventory purchases; working capital; expansion; preparing your business for the possibility of your deployment; setting up to sell goods and services to the government and recovery from declared disasters. Rates for loans are generally 2.25 percent to 4.75 percent over prime depending upon the size and maturity of the loan.

Small Loan Advantage and Community Advantage 7(a) Loan Initiatives
SBA introduced two new initiatives in February, 2011, aimed at expanding access to capital for small businesses and entrepreneurs in underserved communities.

Small Loan Advantage and Community Advantage Loans offer a streamlined application process for SBA 7(a) loans up to $250,000. Both programs have a maximum loan size of $250,000 with a guarantee of 85 percent for loans up to $150,000 and 75 percent for those greater than $150,000. Most Small Loan Advantage loans can be approved in a matter of minutes through electronic submission (e-Tran); non-delegated Small Loan Advantage loans will be approved within 5 to 10 days. Most Community Advantage loans will be approved within 5 to 10 days. Small Loan Advantage features streamlined paperwork, with a two-page application for borrowers and lenders can use their own note and guaranty agreement; Community Advantage features streamlined paperwork, with a two-page application for borrowers.

Small Loan Advantage is open to financial institutions participating in SBA’s Preferred Lender Program (PLP). Community Advantage is open to Community Development Financial Institutions, SBA’s Certified Development Companies and SBA’s nonprofit microlending intermediaries.

Rural Lender Advantage
The Small/Rural Lender Advantage (S/RLA) is designed to accommodate the unique loan processing needs of small community/rural-based lenders by simplifying and streamlining loan application process and procedures, particularly for smaller SBA loans.

Key features are a streamlined 7(a) process for small loans ($350,000 or less) and a one page application (two sided) for very small loans with key, but limited additional information required for loans above $50,000. Guarantees of 85 percent for loans of $150,000 or less and 75 percent for loans greater than $150,000 with expedited processing of routine loans within 3-5 days.

Bonding Program (Surety Bonds)
SBA’s Surety Bond Guarantee (SBG) Program helps small business contractors who cannot obtain surety bonds through regular commercial channels. SBA can guarantee bonds for contracts up to $5 million, covering bid, performance and payment bonds, and in some cases up to $10 million for certain contracts.

Venture Capital Program (Equity Financing)
SBA’s Small Business Investment Company (SBIC) Program is a public-private investment partnership through which the SBA provides venture capital to small businesses. SBICs are privately owned and managed investment funds, similar to venture capital, private equity and private debt funds in terms of how they operate and their ultimate objective to generate high returns for their investors. However, unlike those funds, SBICs limit their investments to qualified small business concerns as defined by SBA regulations.

There are other, specialty programs, such as Export Express Loans and Export Working Capital, International Trade Loans and Disaster Loans.

For more information, contact the SBDC nearest you. Or, you may reach the SBA directly at the following locations or visit their Web site at www.sba.gov:

SBA District Office
Clarksburg Federal Building
320 West Pike St.
Suite 330
Clarksburg, WV 26301
(304) 623-5631
SBA Branch Office Building
405 Capitol St.
Suite 412
Charleston, WV 25301
(304) 347-5220

CDC/504 Loan Program
The Certified Development Company (CDC)/504 Program provides small businesses with longterm, fixed-rate financing to acquire major fixed assets for expansion or modernization. CDCs work with SBA and private sector lenders; typically, a CDC/504 project includes:
  • A loan secured from a private sector lender with a senior lien covering up to 50 percent of the project cost
  • A loan secured from a CDC (backed by a 100 percent SBA-guaranteed debenture) with a junior lien covering up to 40 percent of the project cost
  • A contribution from the borrower of at least 10 percent of the project cost (equity)

This means that 100% of the project cost is covered either by contribution of equity by the borrower, or the senior or junior lien.

Proceeds from 504 loans must be used for fixed asset projects, such as purchase of land, including existing buildings; cost of improvements; construction of new facilities or modernizing, renovating or converting existing facilities and purchase of long-term machinery and equipment. Proceeds cannot be used for working capital or inventory, consolidating or repaying debt, or refinancing or businesses engaged in speculation or investment in rental real estate.

To be eligible for a CDC/504 loan, your business must be operated for profit and fall within the size standards set by the SBA as small; that is, it does not have a tangible net worth in excess of $7.5 million and does not have an average net income in excess of $2.5 million after taxes for the preceding two years. Generally, your business must create or retain one job for every $65,000 provided by the SBA, except for small manufacturers which have a $100,000 job creation or retention.

Generally, the project assets being financed are used as collateral. Personal guaranties of the principal owners are also required. Interest rates on 504 loans are pegged to an increment above the current market rate for 5-year and 10-year U.S. Treasury issues. Maturities of 10 and 20 years are available. Fees total approximately 3 percent of the debenture and may be financed with the loan.

West Virginia’s 504 lenders are:

West Virginia Economic
Development Authority

Northgate Business Park
Greenway Building 160
Association Drive
Charleston, WV 25311-1217
(304) 558-3650

Regional Economic
Development Partnership
(RED Partnership)

1310 Market St.
Third Floor P.O. Box 1029
Wheeling, WV 26003
(304) 232-7722

Business Finance Group
535 Winter Camp Trail
Hedgesville, WV 25427
(800) 434-9427

All SBDC centers assist you and your lender in packaging such loans with T-Soft and Optimist 7 software.

US Department of Agriculture: Rural Development
The USDA Rural Development is dedicated to increasing the economic opportunity and improving the quality of life for all rural Americans. To accomplish this, Rural Development coordinates Federal assistance in rural areas of West Virginia.

Rural Development provides technical assistance and funding programs to rural Americans. Those programs are:

B&I Guaranteed Loan Program
A business located in a rural community may qualify for special financing. The U.S. Department of Agriculture (USDA) currently maintains a Business and Industry (B&I) Guaranteed Loan Program, with guarantees of up to 80 percent of a loan made by a commercial lender. Proceeds may be used for working capital, machinery and equipment, buildings and real estate and certain types of debt refinancing.

B&I loans can be guaranteed in rural cities up to 50,000 population; priority is given to applications for loans in rural communities of 25,000 or less. Loan proceeds can be used for business acquisitions; construction; expansion; repair and development costs; purchase of equipment; machinery or supplies; startup costs and working capital and refinancing for viable projects under certain conditions. Loan guarantee limits are 80% up to $5 million, 70% over $5 million to $10 million and 60% over $10 million to $25 million.

Like SBA loans, you need to go through your local bank or financial institution to apply for a B&I loan.

The Renewable Energy and Energy Efficiency Program
The Renewable Energy and Energy Efficiency Program, offers grants and guaranteed loans to help farmers, ranchers, and rural small businesses purchase renewable energy systems and make energy efficiency improvements.

Farmers, ranchers, and rural small businesses with a demonstrated financial need are eligible for this program. Farmers and ranchers must directly engage in the production of agricultural products and obtain at least 50% of their gross income from their agriculture business.

Rural small businesses must meet the definition of a small business according to the SBA small size standards and be headquartered in a rural area. The private entity may include a sole proprietorship, partnership, corporation, and a cooperative.

Value-Added Producer Grants (VAPG)
Eligible applicants are independent producers, farmer and rancher cooperatives, agricultural producer groups, and majority-controlled producer-based business ventures.

Grants may be used for planning activities and working capital for marketing value-added agricultural products and for farm-based renewable energy. The maximum amount that can be awarded is $500,000, and all VAPG funds must be matched by an equal amount of funds from the applicant or a third party. Value-Added Products are defined as 1) changing the physical state or form of the agricultural product; 2) physically segregating an agricultural product or commodity in a manner that results in the enhancement of the value of the product or commodity; 3) producing an agricultural product or commodity in a manner that enhances its value; or 4) using an agricultural product or commodity to produce renewable energy on a farm or ranch.

  USDA/Rural Development
1550 Earl Core Road, Suite 101
Morgantown, WV 26505
(304) 284-4860 • Toll free: (800) 295-8228

State Financing
The West Virginia Economic Development Authority (WVEDA) is the state’s mechanism for providing low interest financing to new and existing business owners whose projects will benefit the state economically through long-term job creation. The programs include direct and indirect loans.

Direct Loan Programs
The WVEDA can provide up to 45 percent in financing fixed assets by providing low-interest, direct loans to expanding state businesses and firms locating in West Virginia. Loan term is generally 15 years for real estate intensive projects and five to 10 years for equipment projects. Loan proceeds may be used for the acquisition of land, buildings and equipment. Working capital loans and the refinancing of existing debt are not eligible.

Loan Insurance
The loan insurance program provides funding through participating commercial banks to assist firms that cannot obtain conventional bank financing. This program insures up to 80 percent of a bank loan for a maximum loan term of four years. Loan proceeds may be used for any business purpose except the refinancing of existing debt.

Industrial Revenue Bonds
This program provides for customized financing through federal tax-exempt industrial revenue bonds. Of the state’s bond allocation, $57,492,750 is reserved for small manufacturing projects; $16,426,500 for qualifying projects in Enterprise Communities, and $90,345,750 for exempt facility projects.

Linked Deposit Loan Program
The program allows small, for-profit state employers with 50 or fewer employees and gross annual receipts of $5 million or less to apply for a linked deposit loan with an interest rate of 1 percent above published New York Prime, up to $250,000.

In order to apply for a Linked Deposit Loan, you must work with your local SBDC business coach. For contact information for your local office, call the Business Ask Me! Line toll free at (888) 982-7232 or find you local office listing in Chapter 14: Using West Virginia’s Business Resources.

Because a participating lender must apply to the state on your behalf for the Loan Insurance, check with your banker before considering either of these loans.

For information on any of these programs, contact:

  West Virginia Economic Development Authority
Northgate Business Park Greenway Building
160 Association Drive
Charleston, WV 25311-1217
(304) 558-3650

Venture Capital
Venture capital companies are certified investors who will contribute capital into a small business in exchange for some level of control in the company and a return on their investment. This is not easy money. Most venture capital companies are interested in projects requiring an investment of $150,000 to $200,000 or more, and expect a return of three to five times their original investment within five to seven years.

Before approaching a venture capital company, you should prepare a thorough business proposal that supports the qualifications of your management team and have a strong and realistic financial plan. While most venture capital funds will invest in any business, some funds are target certain geographic areas or particular industries. Work with your SBDC business coach to select the right fund to approach. Venture capital investment companies must be approved by the West Virginia Economic Development Authority. The West Virginia Jobs Investment Trust is currently the most active venture capital fund in West Virginia. For a complete list of other approved funds, contact the Authority; the information is above.

  West Virginia Jobs Investment Trust
Venture Capital Company
1012 Kanawha Boulevard, E., Fifth floor
Charleston, WV 25301
(304) 345-6200

Additional Financing Programs
The Natural Capital Investment Fund (NCIF) is a business loan fund that provides debt and equity financing to small businesses located in North Carolina, Northeast Tennessee, Southwest Virginia and West Virginia.

The NCIF provides flexible financing and investments and targeted technical assistance to a variety of environmentally-related businesses, which range from small crafts enterprises and specialty food manufacturers to multi-million dollar forest products enterprises. They also finance and invest in businesses involved with Environmental & Green Products/Services.

Sectors of particular interest include: heritage and recreation-based tourism; value-added and sustainable agriculture; water/wastewater treatment; sustainable forestry and forest products; integrated waste management; and technology that promotes improved efficiency and safety in industrial processing.

For more information, contact:

  Natural Capital Investment Fund
Business Lender
Cell (304) 228-3121
Fax: (304) 870-2205

Local Financing Programs
Some local and regional development organizations offer financial assistance to small businesses, particularly if the operation will result in job creation, retention or revitalization of the community. Additionally, county and local governments may offer loan programs for business owners. Contact your local Chamber of Commerce or government offices for information on the scope of services available in your community.

The Small Business Innovation Research (SBIR) and the Small Business Technology Transfer (STTR) programs are federal initiatives that provide over $1 billion in research and development grants and contracts each year to small businesses to develop new products and services based on advanced technologies. These programs provide excellent opportunities to nurture the development of innovative businesses in West Virginia.

The SBDC serves as the centralized source for information and technical assistance regarding the SBIR/ STTR program for West Virginia-based small technology businesses and entrepreneurs.

In an effort to propel technologies, teams and companies that have a proven track record and a technology or innovation with a high degree of potential, the SBDC has initiated an Award Matching Program in conjunction with the federal SBIR and STTR efforts. If a West Virginia-based small business has been successful at Phase I or Phase II the SBDC may be able to match a percentage of the award. To learn more about this funding opportunity, visit click here.

The truth about federal grants: Right off the top — The U.S. government currently does not provide grants for starting or expanding a small business. However, the government does offer plenty of free help planning how to start or improve your business and in securing Small Business Administrationbacked small business loans.

Most federal grants are awarded to organizations planning major projects of benefit to their community. For example, a neighborhood street paving project; a statewide program to retrain displaced workers; or a project to attract new businesses to a depressed downtown area.

Some state grants are available. To find out more, contact your local SBDC business coach and make an appointment to review your eligibility.

The following are grants from two state organizations that assist small business owners.

The Division of Culture and History
The Division of Culture and History is home to the State Museum and Theater, the State Archives and Collections, and a library for genealogical research. The Division includes the West Virginia Commission on the Arts and the State Historic Preservation Office.

Through a long range planning process, the West Virginia Division of Culture and History (WVDCH), on behalf of the West Virginia Commission on the Arts (WVCA), worked closely with artists, communities, arts organizations and arts educators to identify arts needs of West Virginians. With direction from the governor and the West Virginia Legislature, the WVCA has adopted a number of programs to address those needs.

The following table lists grant programs for individual artisans and crafters:

Professional Development. February 1. Up to 75% of project cost and up to 50% for subsequent years. Provides support for professional and emerging artists seeking ways to expand and/or improve their own work, or share their expertise. Helps art organizations better meet the need of under-served artists.

Training and Travel Fund. No later than 6 weeks prior to the event. Up to 50% of eligible expenses; funds decrease for repeat visit to same event. Provides funding support on a reimbursement basis to attend training opportunities.

There many other grants for arts organizations and educators. Call (304) 558-0220 or go to wvculture.org to see a complete listing and access online application forms.

Tourism Advertising Partnership Program (MAPP)
The Tourism Matching Advertising Partnership Program is a reimbursable partnership program that provides matching funds for innovative and effective direct advertising projects that increase visitation and travel expenditures in the State of West Virginia impacting the economic growth of the travel industry.

There are various eligibility criteria and levels of awards. For complete information, definitions and forms, call Tourism at (304) 558-2200, extension 59325 or go to wvtourism.com/MAPP.

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When a small business requests a loan, one of the first things a lender looks at is personal and business credit history. So before you even start the process of preparing a loan request, you want to make sure your credit is good.

Get your personal credit report from one of the credit bureaus, such as TransUnion, Equifax or Experian or through a credit report service, such as annualcreditreport.com. You should initiate this step well in advance of seeking a loan. Personal credit reports may contain errors or be out of date, and it can take three to four weeks for errors to be corrected. It’s up to you to see that corrections are made, so make sure you check regularly on progress. You want to make sure that when the lender pulls your credit report, all the errors have been corrected and your history is up to date.

Once you obtain your credit report, check to make sure that all personal information (your name, Social Security number and address) is correct. Then examine the rest of the report carefully. It contains a list of all the credit you obtained in the past (for example, for credit cards, mortgages, student loans), with information on how you paid that credit. Any item indicating that you have had a problem in paying will be toward the top of the list. These are the credits that may affect your ability to obtain a loan.

If you have been late by a month on an occasional payment, this probably will not adversely affect your credit. But it is likely that you will have difficulty in obtaining a loan if you are continuously late in paying your credit, have a credit that was never paid, have a judgment against you, or have declared bankruptcy in the last seven years.

A person may have a period of bad credit as a result of divorce, medical crisis, or some other significant event. If you can show that your credit was good before and after this event and that you have tried to pay back those debts incurred in the period of bad credit, you should be able to obtain a loan. It is best if you write an explanation of your credit problems and how you have rectified them, and attach this to your credit report in your loan package.

Also, work with your local Consumer Credit Counseling service to help repair and improve your credit. Find your local office in the list below:

1219 Ohio Avenue
Dunbar, WV

109 East Main Street
Suite 102 Beckley, WV

Green Valley Business Center
Bluefield, WV

Mt. Vernon Plaza
3985 Teays Valley
Hurricane, WV 304-201-5017
699 Stratton Street
Logan, WV

142 North Queen Street Suite
106 Martinsburg, WV

1025 Main Street Suite
310 Wheeling, WV

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