by Bridget Lair
Debt finance is the only viable funding option for many companies. They may finance their entire operation with debt or use it to build the company until they can access other types of funds. Even traditional debt finance may be out of reach for many incubator clients because their businesses are too new or they lack necessary collateral and experience required for a small business loan.
Incubator loan funds can help close that funding gap and help get start-ups off the ground, but these funds can be expensive and complicated to run. The trick is knowing when your incubator can best serve clients' needs through an internal loan fund and when it's better to assist them to access external resources.
Many incubators and other economic development organizations use a grant or long-term/low-cost loan to start, replenish and expand their loan funds. Often, an RLF provides a bridge between the amount a client can obtain on the private market and the amount needed to start or sustain a business.
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Keywords: Funding sources/fundraising – incubator, economic development, for-profit incubators, venture capital, In-house loan and equity financing program, Angel investors/network, capital access, staffing – incubator
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