Know any entrepreneurs who don’t have their mind on their money and their money on their mind?
Didn’t think so.
Unless you already have the wealth to invest in yourself debt-free, you’ve been on the funding hunt. Or you will be. Within the most popular funding categories — grants, debt, financing, and venture capital — there are countless options for funding. And so many decisions to make.
There are no easy answers, but there are guideposts. Here’s a snapshot of how South Carolina businesses have been getting the cash they need to launch and grow.
We dug into some of the data on Crunchbase, the behemoth database of business investment data, to see what’s been happening in the Columbia area. If you’re thinking your next cash infusion might come from venture capital or angel investments, consider this look at the local landscape from June 2021 through June 2022.
Columbia’s list is smaller than other major metros in the state, with just seven for-profit companies listed. Focus industries include insurance (RiskAdvisor, Rainwalk), information security (Validide, Lokdon), real estate (Bird Dog Deals), clinical laboratory solutions (Integrated Micro-Chromatography Systems), and an online literary network (WriteSpike).
Other than non-equity support from Techstars Austin Accerator and Columbia’s own Launchpeer, the South Carolina Research Authority (SCRA) has been the main funder over the past year. As a result, Columbia’s “amount” column is dominated by SCRA grants of $25,000 and $50,000. What else can we say but 👀 at SCRA?
The vast majority of founders go to a large or small bank when they need capital — 90%, according to the federal reserve’s 2021 Small Business Credit Survey conducted late last year.
These South Carolina companies have fewer than 500 employees, with at least one who is not the owner. Only 8% said they sought the kind of equity investment described above.
Here, too, there’s a mix-and-match process. Pretty much everyone sought funds from a large or small bank. And 65% applied to credit unions, online fintech companies, finance companies and CDFIs, or Community Development Financial Institutions.
Interestingly, more than half of companies that needed funds said they didn’t apply. Even in the throes of the pandemic, they remained averse to debt, felt it would cost too much, or were discouraged about their chances of being approved.
Apparently, that last bit of pessimism wasn’t completely unwarranted. Only a third of companies received all the funding they asked for, while 39% didn’t get any of it.
If you’re thinking of going the fintech route, know that only 32% of respondents found happiness with online banks. Why so bad? You’re likely to end up paying for that faster, simpler application process with high interest rates and unfavorable repayment terms.
Where will you find the least headaches? Probably a small bank if you’re like the 76% of entrepreneurs nationally who were happy with their experience, according to the Fed. That’s compared with a 62% happiness rate for those who dealt with big banks.
Although rates have almost doubled since the lows in early 2021, they are still relatively low compared to historical rates, says Jana Scroggins, senior vice president at United Community Bank. She says over the past year, business loan requests across the state have ranged from $500,000 to $20 million (and sometimes below and above).
Banks are typically looking to lend to established businesses with solid sales or profit margins and strong credit profiles, Scroggins says. And the best time to borrow money is typically when you have a strategic plan for the funds and aren’t in critical need of funding.
Come to think of it, that’s what everybody told us about the best time for any kind of fundraising: do it before you need it.
Hopefully you’re ready to take action now that you’ve seen how and where Columbia gets its funding. Check out the resource directory on page _____ to explore options in the local entrepreneurial ecosystem.
If this rundown confirms that you’ve already taken the right steps for your business, we’re thrilled. Drop us a line. We’d love to hear about why you’re already patting yourself on the back.