Small Business Grants and Contests Still Available in Illinois

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Illinois, or the Prairie State as some call it, is home to 2.1 million small businesses, with over 232,000 located in the Windy City of Chicago, making it one of the most populous states for small businesses. During the COVID-19 pandemic, nearly 35% of the state’s small businesses were forced to shutter either temporarily or permanently, and rising interest rates, worker shortages and spiking inflation are further squeezing them.

Now is the time for small businesses in the state to search high and low for grant opportunities and contests in which they can gain access to free money in order to survive. Here is a list of grants and contests on both a national and local level that are still available to Illinois-based small businesses. 

On a National Level:

Kapitus’ $250K Building Resilient Businesses Contest – Deadline is Looming!

Kapitus has launched its Building Resilient Businesses contest, in which one first-place winner will receive $100,000; one second-place winner will receive $50,000 and five third-place winners will each receive $20,000. To enter, simply send a homemade, 2-minute video briefly describing your business, how it was able to persevere over the last two years, and how you would spend $100,000. The contest is open to all small businesses in the US (excluding Vermont and Colorado) that have been in business for at least a year and have less than $5 million in annual revenue. The deadline to apply is June 30, 2022. To enter the contest, click here.

Antares REACH Grant Program

Small business consulting firm Hello Alice will award $20,000 in grants to women- and minority-owned

Antares Reach Small Business Grants Illinois

The Antares REACH Grant program is giving away $20,000 to women- and minority-owned small businesses nationwide.

businesses to help them prepare for the next stages of growth. The grants are being funded by Chicago-based private equity firm Antares Capital. Applicants must have less than $5 million in annual revenue, have a demonstrated need for support and a strong business plan for growth. Grant winners will be eligible for an additional $5,000 in funding after completion of a post-grant support. The deadline for applications is July 15, 2020. To apply, you are required to become a member of Hello Alice’s community of small businesses. For more information, click here.

WomensNet Amber Grant

WomensNet gives away one $10,000 grant and four $1000 grants to women-owned businesses in distinct categories every month such as skilled trades (January), hair care and beauty products (August) and Creative Arts (October). The site also gives grants of $25,000 to two businesses each at the end of each year, with both of them being previous $10,000 monthly grant winners. Applications are due on the last day of every month. To apply, click here. 

American Express and Main Street America’s Inclusive Backing Grants

AmEx and Main Street America are providing more than 300 grants of $5,000 each over four cycles throughout 2022 to small businesses located in older or historic commercial districts with priority to be given to small businesses owned by the LGBTQ+ community, Hispanic-owned, veteran-owned, and business owners who are women and people of color. Applications for the fourth grant cycle are now being accepted by business owners who identify as native or indigenous people, Hispanic, LGBTQ+ and immigrants and refugees. Membership in the National Main Street Center is not required. Applications for the fourth grant cycle can be found here.

Skip Monthly Business Grant

Skip is a California-based social media company that helps both people and businesses get access to government-related services and information and is part of YoGov.org. Every month since March 2020, Skip uses revenues from its YouTube channel which awards $1,000 grants to small business owners as well as free services and information. The winner is announced on its YouTube channel on the third Wednesday of every month. For more information and to apply, click here.  

 

State Level: Open to Illinois Small Businesses Only

The Land of Lincoln also has several grant and contest opportunities, especially in Chicago, that are still open:

Neighborhood Opportunity Fund Grants 

Chicago’s Neighborhood Opportunity Fund is giving away grants three times in 2022 to small businesses in Chicago’s West, Southwest, and South sides to make improvements to their physical locations. These improvements can include land acquisition for expansion, roofing replacement or repairs and money to cover financing fees for a loan or lines of credit. The awards are up to $250,000 for small improvement projects and over $250,000 to $2.5 million for large projects. Deadlines for the second and third rounds of applications have not yet been established, but you can still apply. To learn more, click here.

City of Chicago’s Annual Business Plan Competition

Chicago Small Business Grants loans

The city of Chicago is giving away several grants to keep its small businesses afloat.

Chicago’s Office of the Treasurer Stephanie Neely is administering a contest to startups and young businesses in Chicago. The first-place winner, to be announced sometime in October, will take home $5,000. To enter, a small business must be a startup or no more than three-years-old with annual revenues of no more than $2 million. Applicants must submit their business plans as well as templates for their executive summaries. Applications are due on July 6, 2022. To learn more, click here. 

Restaurant Employee Relief Fund

The Illinois Restaurant Association Education Relief Foundation is awarding grants to restaurant employees who have faced personal and financial hardships within the past 90 days to encourage food service workers in the state to remain at their jobs. Those hardships include unexpected illness or injury, death of a family member or a natural disaster. The grants range from $250 to $1,500. While not paid directly to business owners, this grant can help owners make things a little easier on staff that is sticking it out through the hard times. Deadline to apply is August 31, 2022. To apply, click here.

Small Business Improvement Fund (SBIF) Remodeling Grants

The SBIF Remodeling grants are aimed at larger small businesses in Chicago with physical locations that are seeking to remodel or visually improve their business locations. To be eligible, the applicant must employ up to 200 workers, and have an average of $9 million in annual sales over the previous three years. Or commercial property owners with a net worth of up to $9 million and liquid assets of up to $500,000. The grant will cover 30% to 90% of a business’ remodeling work up to $150,000. The first deadline for applications is June 30, 2022, while the second and third deadlines are on August 1st and August 31st, respectively. To learn more, click here. 

Don’t Give Up Free Money!

With most federal pandemic aid programs dried up and current economic challenges such as inflation and rising interest rates putting a further squeeze on small businesses, it is more important than ever to apply for a chance to get free money for your business, be it through local or national grants or contests. 

Small Business Grants Still Available in New Jersey

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New Jersey serves as the headquarters for some of the largest pharmaceutical companies in the world and is known for its sprawling suburbs, manufacturing capabilities, pristine shorelines and its 861,000 small businesses. However, high taxes, bloated state budgets and little support from the state government has always made it a tough place for small businesses to thrive in. 

Those difficulties were compounded by the COVID-19 pandemic, which hit the Garden State’s small business community harder than 2013’s Superstorm Sandy. From restaurants along one of the state’s many boardwalks to retailers in one of the state’s 52 cities, roughly one-third of small businesses temporarily or permanently closed between 2020 and 2021. Many continue to struggle to stay afloat to this day, especially with spiking inflation, interest rate hikes and another recession looming.

Fortunately, there are several grant programs and contests available on both a national and state level that can help those small businesses survive and grow. 

On a national level, there are grants and contests that are still open that can land you a large pool of money and are worth applying for:

Kapitus’ $250K Building Resilient Businesses Contest – Deadline is Looming!

Kapitus has launched its Building Resilient Businesses contest, in which one first-place winner will receive $100,000; one second-place winner will receive $50,000 and five third-place winners will each receive $20,000. 

To enter, simply send a homemade, 2-minute video briefly describing your business, how it was able to persevere over the last two years, and how you would spend $100,000. The contest is open to all small businesses in the US (excluding Vermont and Colorado) that have been in business for at least a year and have less than $5 million in annual revenue. The deadline to apply is June 30, 2022. To enter the contest, click here.

WomensNet Amber Grant

WomensNet gives away one $10,000 grant and four $1000 grants to women-owned businesses in distinct categories every month such as skilled trades (January), hair care and beauty products (August) and Creative Arts (October). The site also gives grants of $25,000 to two businesses each at the end of each year, with both of them being previous $10,000 monthly grant winners. Applications are due on the last day of every month. To apply, click here. 

American Express and Main Street America’s Inclusive Backing Grants

AmEx and Main Street America are providing more than 300 grants of $5,000 each over four cycles throughout 2022 to small businesses located in older or historic commercial districts with priority to be given to small businesses owned by the LGBTQ+ community, Hispanic-owned, veteran-owned, and business owners who are women and people of color. 

Applications for the fourth grant cycle are now being accepted by business owners who identify as native or indigenous people, Hispanic, LGBTQ+ and immigrants and refugees. Membership in the National Main Street Center is not required. Applications for the fourth grant cycle can be found here.

Skip Monthly Business Grant

Skip is a California-based social media company that helps both people and businesses get access to government-related services and information and is part of YoGov.org. Every month since March 2020, Skip uses revenues from its YouTube channel to award $1,000 grants to small business owners as well as free services and information. The winner is announced on its YouTube channel on the third Wednesday of every month. For more information and to apply, click here.  

State Level: Open to New Jersey Small Businesses Only

Despite the fact that most of the pandemic-related federal aid to small businesses has dried up, the state is still offering several grants and inexpensive financing opportunities to assist small- and micro-businesses:

The Small Business Lease Grant

New Jersey Economic Development Small Business Loans Grants

Small Businesses in the Garden State should always keep an eye on The NJ Economic Development Corp. for new grant and tax relief opportunities.

The NJ Economic Development Authority (NJEDA) is administering grants to help small businesses and nonprofits with physical locations pay their rents. The $10 million program was funded by the NJ Economic Recovery Act passed in 2021 and is being funded by the state’s Main Street Recovery Finance Program. 

The idea behind the program is to assist in filling vacant lots across the state and assist in the growth of small businesses. Applicants must have a new or newly amended lease that is at least 250 sq. ft. larger than their previous space, and the lease must be for a minimum of five years. Deadline is ongoing, and funding amount depends on the business. To learn more, click here. 

New Jersey State Trade Expansion Program (STEP)

New Jersey has always been a major hub for international trade due to its many marine ports, such as the Port Newark Container Terminal, the Port Jersey container terminal in Jersey City and South Jersey Port Corp. in Camden. 

As such, the NJ State Trade Expansion Program (STEP), in conjunction with the US Small Business Administration, are offering year-round grants to small businesses in the state that are new to overseas trade or sell their products and services overseas. Applicants must have been in business for at least one year at the time of application and manufacture goods or produce services that are at least 51% US content. To learn more, click here.

NJEDA Small Business Improvement Grant Program

NJEDA is awarding grants of up to $50,000 to assist small businesses with physical locations in making improvements and upgrades to their buildings, as well as with purchasing new furniture, office equipment and fixtures. The project costs must be at least $5,000 and must have been at most two years prior to the date of application. 

Total project costs that exceed $50,000 will be subject to Green Building Standards, and applicants that use at least four workers may be subject to affirmative action requirements. Applicants will be awarded on a first come, first served basis. There is no set deadline for application To learn more about the grant program and apply, click here.

Main Street Micro Business Loan Program

NJEDA also oversees the Main Street Micro Business Loan Program. While this is not a grant program, it is popular among very small businesses in the state because it provides long-term, low interest loans to businesses in the state with 10 or fewer employees and annual revenues of no more than $1.5 million. The maximum term for these loans is 10 years and carry an annualized interest rate of 2%. The applicants must have been in business for at least six months. No collateral is required for the loan. To learn more and apply, click here.

Free Money is Better than Attitude!

Best selling author Janet Evanovitch once described New Jersey as a place “where dignity always runs a poor second to getting in someone’s face.” While the state’s small business owners may be tough and have attitude, they’re still going to need help, especially in the economically volatile times we’re living in. If you do own a small business in the Garden State, keep the door open to any new opportunities for free money.

Handshake in front of crane

To Rent, To Lease or To Buy:  Obtaining Expensive Equipment for Your Business

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Any small business owner stuck between buying or renting essential equipment knows that the query is not a simple binary. Making a choice you are firmly satisfied with requires both a full understanding of your current financial standings as well as a clear picture of where you anticipate your business to stand in the future. And making the wrong decision can have lasting consequences of their own.  Let’s discuss practical use cases to determine where buying, renting, or leasing may be right for your business.

When to Buy…

Potential Benefits to Buying Equipment

Buying property or equipment – whether through cash on-hand or equipment financing – has the obvious incentive of true ownership. Having absolute ownership over your property or expensive equipment has the chance to be a cost-saver in the case of equipment you use frequently or in property that appreciates in value. Consider this example: a farmer with 75 acres of tillable land outright purchases a combine harvester. Since the combine harvester is necessary to reap crops annually, the purchase may very well be a financial gain after several years. Consider as well the IRS Section 179 allowance; businesses were allowed to deduct up to $1,080,000 as a first year write off in equivalence to equipment or software purchased during that tax year in 2022.

Potential Detriments When Buying Equipment

This example, however, plays equally well into the downsides of purchasing: combine harvesters are exceedingly expensive outright (like many industry-specific machines) and can be equally expensive to repair if you don’t already employ sufficient technicians. Imagine, as well, the potential that a certain crop doesn’t properly germinate or labor shortages lead your team to miss proper times for reaping; in the case of leasing or renting, the tangible financial hit of that reduced harvest would likely not be as dire.

Buying is a Bet for the Best

Buying expensive equipment outright requires sage-like industry knowledge as well as an exit strategy in order to be fully insulated, or as much so as is possible. Business owners on their first venture or entering a new industry may find that buying equipment more than double-digit percentages of their total capital is markedly unwise. Small businesses have the most to gain from owning their equipment… but only if that equipment meaningfully returns on its investment. Purchased equipment that fails to see regular use or drastically impacts your capital or overhead has the risk of becoming a monument to rash decisions rather than a useful business tool.

When to Rent…

Potential Benefits to Renting Equipment

Not every industry allows for easy renting of equipment. Renting generally is most beneficial to industries that are wholly seasonal or have tracked busy seasons. If you run a year-round business with consistent revenue, customers, and products, it is unlikely the monthly price and lack of ownership could in any way benefit your business.

Since renting requires the least capital upfront, it is often the most attractive option for freshly minted businesses that are still finding their stride. A worst-case scenario for a small business is preemptively paying for assets that don’t turn around to help your business. Let us consider the example of a farmer and a combine harvester again: in 2022, new or even lightly used combine harvesters can cost stupefying amounts of money upfront, often close to $750,000. In our example of a 75-acre farm, that cost is likely too much capital for a farm of this size which is not the subsidiary of a larger corporate structure. Renting a combine may simply be the only way for smaller farms (or small seasonal businesses) to turn a profit annually. The hope for farms and small businesses with similar structures, of course, is to save enough capital or meaningfully study trends enough to which purchasing expensive equipment amounts to a no-brainer good decision.

Potential Detriments When Renting Equipment

Rented equipment isn’t yours. Flatly, this almost explains any major downside that comes with renting. In the case of damage to any machinery you rent, there is a very good chance you will also have to pay for repairs on top of your existing rate for the rental. And let’s go back to our farmer one more time: Our farmer simply does not have the capital to outright buy a combine harvester (as is the case for many harvest-based farmers) and annually rents a combine from a regional host. Here’s the trouble: seasonal harvests happen all at once for farmers in the same region. This means that every farmer in that region that doesn’t own their own combine is going to rush to rent. In that rush, there is a more than possible chance that certain farmers may not secure a combine and then suffer the loss of an entire harvest. Leaving essential equipment in the hands of a third party introduces unpredictable variables for business owners. And for small business owners with smaller safety nets, suddenly being left without a suitable rental can spell disaster.

Rent From Trusted Sources and Only When You Have To

Unpredictability can quickly shutter seasonal businesses for good; of course, seasonal businesses are also those who are most likely to rent expensive machinery. Renting isn’t bad by nature; many industries like construction and, of course, agriculture wholly depend on rentals in order to remain profitable. This simply means that every choice to rent or buy ought to be informed by genuine industry trend data. Whether this means understanding the potential loss from not renting a certain piece of equipment or funding a safety net in the event of a missed rental or other unexpected hits.

Third Choice… Leasing

For those industries where rentals are rare or simply implausible, leasing can likely be a worthy third choice to consider when dealing with any major, expensive machinery. Leasing is a great option for businesses that use equipment that is constantly changing. With a lease, you’re only committed to equipment for the length of the lease, so you’re not stuck with equipment that can quickly become obsolete. While vehicles, specifically, are most peoples’ first thought for lease potential (our farmer and combine are back!), it’s worth knowing that several major industries lease a wide variety of machines. Offices can lease expensive copy machines, charter schools can lease student laptops, and several more practical examples are out there and likely relevant to just about every industry. 

Leave No Stone Unturned and No Path Untested

No small business owner can be fully certain that buying, renting, or leasing expensive equipment is the right choice. What small business owners can do, however, is consider, as we have here, the potential benefits and detriments to each choice parallel to their own business. Those businesses who make informed decisions with safety nets and back up plans have the least to lose when making a major financial decision.

What Type of Financing is Best for Your Small Business?

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Small businesses, slammed by inflation, supply chain disruptions and staffing shortages,  are expected to rely on debt financing heavily this year, as pandemic relief programs such as the SBA’s Economic Injury Disaster Loan and the Paycheck Protection programs have long since dried up. If you believe your small business needs to take on debt to survive this rough patch, however, you also need to evaluate which of the many financing tools available are right for you.

The good news is that there are several types of loans to fit your specific needs – whether you’re seeking money to keep your operations afloat; purchase vital equipment; keep your business running during off-season months; you’re seeking to expand, or you need cash for an emergency – there is an option for you.  Some loans carry more requirements and may be more expensive than others, so it’s crucial that you learn which is the most practical and cost-effective for your business.

Here are some of the most common types of small business financing to choose from, depending on your business’ specific needs:

SBA Loan

SBA Small Business Administration lending Kapitus

While pandemic-related assistance has dried up, the US Small Business Administration still offers plenty of financing options for small businesses.

An SBA loan is backed by US Small Business Administration and is sold through registered agents, be it a traditional bank or an alternative lender. One of the most sought-after loans by small businesses is the SBA 7(a) loan, as it often offers a comparatively low interest rate and terms of between 10 to 25 years and has a maximum borrowing limit of $5 million. This money can be used to grow your business, purchase new equipment or simply as operating cash.

However, just because you want a 7(a) loan, doesn’t mean you’re going to get one. The borrowing requirements are typically more stringent than what a bank or alternative lender would require for a term loan. These include a FICO score near 700, a required number of years in business and a strong, consistent history of cash flow. Other drawbacks of a SBA 7(a) loan include the fact that the turnaround time for the loan can be weeks, and collateral is often required for loans exceeding $350,000. In addition, SBA loans have a unique requirement which indicates that you must use “alternative financial resources, including personal assets, before seeking financial assistance.” 

If you believe your business qualifies for such a loan and you can wait several weeks to get approved and get the money, you should speak to a lending professional regarding what terms you can get.

Term Loans

Term loans, or business loans, are offered by both banks and alternative lenders and are viable financing options if you’ve been turned down for a 7(a) loan or if you need money quickly. The requirements of a term loan usually aren’t as strict as that of a 7(a) loan – for example, your FICO score probably doesn’t need to be as high as it would for a 7(a) loan.

The terms of the loan, such as interest rate and maturity date, are negotiated between the borrower and lender, and in some cases, especially with alternative lenders, you may get approval and funding within 24 hours. Similar to the 7(a) loan, you can use the proceeds for virtually anything related to your small business.

The cons of a term loan are that they are going to carry a higher interest rate than a 7(a) loan – depending on how much risk you represent to the lender – and typically offers terms of five- to 10 years, though they can be much shorter than this depending on the lender. While the requirements of a term loan may be less stringent than a 7(a) loan, you’re still going to need a strong FICO score, at least two years in businesses and a strong cash flow. Traditional lenders may also require you to put up collateral. 

SBA Microloan Program

The SBA also guarantees microloans – small loans of up to $50,000 – through intermediary lenders. These lenders often operate in underserved communities and work with minority- and women-owned businesses, and their purpose is to provide financial help to new businesses. According to the SBA, the average microloan is $13,000. These loans have a maximum term of six years, and interest rates are going to be significantly higher than a term or 7(a) loan, and often require the borrower to put up personal assets as collateral. 

Invoice Factoring

Invoice factoring is typically offered by alternative lenders and can help you with your cash flow if your customers are slow to pay. In this type of financing, a lender will provide you with cash for your outstanding invoices in exchange for a percentage of the money that is owed to you. You can choose which invoices to factor, and this type of financing won’t add debt to your balance sheet since the money that you’re “borrowing” is backed by money that is already owed to you. 

Invoice factoring is best if you need money quickly to keep your operations going while you’re waiting for your customers to pay, and if you don’t mind not getting all the money that is owed to you by customers. The turnaround time for this type of financing is usually very fast, sometimes happening in 5- to 10 business days.

Equipment Financing 

Equipment financing is a great tool to make sure you have the best, most modern machinery to keep your business running.

Whether you’re a small agricultural company that relies on row crop tractors; a contractor that needs bulldozers or backhoes for construction projects, or a doctor or dentist who needs the latest X-ray machine to treat patients, having high-quality, modern equipment is the lifeblood of your business. Machines, however, can cost a fortune, and your small business may not have the cash to pay for that machinery upfront. This is where equipment financing can serve you best.

Your FICO score generally must be in the high 600s and in most cases, you have to have been in business for at least a year. The advantage of equipment financing is that the equipment itself often serves as the collateral – not your personal assets. Ideally, the revenue that your company generates from the equipment you’ve purchased should more than cover the interest and principal payments you’re going to have to make. 

Purchase Order Financing

Obviously, your business needs inventory to sell in order to make money. However, you may not have the cash up front to pay for the inventory you need to meet a customer’s order. This is where purchase order financing comes in. PO financing pays your vendors upfront so you can keep your customers happy, grow your business and maintain your cash flow. 

In some cases, the lender may even take on the responsibility of payment collections from your customers’ orders, freeing you to run your business smoothly. To qualify, you generally should be a profitable business, and it’s your suppliers and customers – not you – that must have good credit. This type of financing typically requires a low factor rate as the cost of capital.

Business Line of Credit

A business line of credit, similar to a personal or business credit card, is typically an unsecured line of credit extended to you by a lender for an annual percentage fee. The limit on the business line of credit is negotiated beforehand and typically, the line of credit must be paid off at various, pre-agreed upon intervals. The benefits of this type of financing are tremendous. 

The APR is typically significantly lower than a business credit card (although you won’t get any rewards points that you might get with a credit card), and the credit can be used for just about any type of business need, such as keeping your business operating during non-seasonal times of the year or through a recession, cash emergencies and the need for sudden, unexpected purchases. 

The caveat is that a business line of credit may not be as convenient as a business credit card for smaller needs, such as a business meal or the purchase of a small piece of office equipment, so carefully consider which one is best for you. 

Revenue-Based Financing

Revenue-based financing is an expensive financing tool in which you essentially borrow against your future sales. If your company is about to launch a new product that you believe will be highly profitable and you need cash to support the initial promotion of it, or if the roof of your office collapses and you need emergency cash to get it fixed to continue your operations, for example, then RBF may be a useful financing tool. 

Before you consider this type of financing, however, consider that the cost of capital is higher than most forms of financing, as your company will be required to make pre-agreed upon payments equal to the percentage of your overall future sales plus a multiple of the borrowed amount. This type of financing requires your business to have a strong sales history, so it should only be considered for specific, short-term cash needs. 

Consider Your Options Carefully

If you decide that your business needs financing, carefully consider which type of product you choose, your needs and what you are willing to pay in terms of cost of capital. Seek counsel from your accountant or financial advisor. Keep in mind that lenders want to do business with you and don’t wish to have you use a financing product that you may not be able to afford, so they will be willing to work with and advise you as well. 

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Should You Take Out a Business Loan? Consider this Checklist

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If your small business is ready to obtain financing, that means you should be in a great position – your sales are flowing, your earnings are consistent, and you’re ready to expand your business’ footprint. Before you do take out a loan, however, it’s crucial that you decide first whether taking on debt is truly advantageous to your business, and which lending product is best to meet your goals.

Should You Take Out a Loan?

One of the most pressing questions you need to answer before taking on any new financing is: how well-equipped is your business to take on new debt? To answer this question, you should complete a comprehensive checklist regarding your business:

#1 Do I Even Qualify for a Loan?

Different types of loans require different qualifications, but you should first make sure that your business meets certain requirements from lenders. Your minimum FICO score should probably be in the 680 to 700 range for certain financing products such as a term loan, although alternative lenders such as Kapitus may require slightly lower scores, depending on which financing vehicle you are applying for. 

Lenders will also want to see how strong your company’s business plan is; how long you’ve been in business; what your plans for growth are, and the consistency of your cash flow in order to gauge whether you have the ability to pay back the loan. 

If you’re not sure whether you qualify, you should speak to a lending officer at the institution you are seeking to borrow from, who can walk you through the steps in which your business needs to take in order to qualify for a loan.

#2 Why Do You Need a Loan?

Ideally, you are seeking to borrow money to expand your business and increase revenue, and hopefully, that increased revenue will offset the cost of capital for your loan as well as enable you to make monthly loan payments. 

As we all know, however, we’re currently not living in an ideal economic environment, as small businesses are still struggling to make ends meet in a turbulent economy. Fortunately, there are a variety of financing products to choose from that can provide much-needed cash for all sorts of reasons. Some of these are:

  • The development of a new product or service which you foresee increasing sales.
  • Opening a new office or facility.
  • An emergency such as a collapsed roof or crucial machinery breaking down in which you need emergency cash to keep your business in operation. 
  • Getting immediate cash for invoices.
  • Increasing your inventory to meet high demand.
  • Meeting off-season expenses.
  • Purchasing new equipment. 

Once you’ve decided the reason you need financing, you can examine several distinctly different financing products that can meet your needs.

#3 How Strong is Your Cash Flow?

After credit score and business longevity, lenders will want to see your business’ cash flow – the net balance of cash that’s moving in and out of your business on a regular basis. If you’re borrowing to finance the development of a new product, for example, and sales of that product don’t end up being as strong as you thought they would be, a lender will want to know if you’ll still be able to make monthly installment payments on the loan you took out. This is what a strong cash flow will indicate to them.

There are several ways to improve your cash flow if necessary – you may want to examine ways to cut unnecessary spending, optimize inventory management, hound customers to pay their invoices and improve your cash flow forecasting. Your loan approval could very well depend upon the strength of your cash flow. 

#4 Is the Price Right?

Courtesy: CBS Television. No, you don’t have to be a contestant on The Price is Right, but you do shop around for the best prices in terms of cost of capital.

Anytime you borrow money, be it through a business credit card, a mortgage or a term loan, you are going to have to pay a cost of capital. This can be the interest rate associated with a term loan, the APR on a business credit card or line of credit, or the costs associated with invoice factoring or revenue-based financing. Whatever financing instrument you choose, it’s crucial that you ask the lender the total amount you will be paying back over time. 

It’s also just as crucial to shop around for lenders and consider which ones may be offering the best terms, and which ones can offer you a quick turnaround. 

Traditional banks often have more stringent borrowing requirements, while alternative lenders often are  more expensive but will typically offer a quicker turnaround time on your loan with fewer requirements. 

Something else you should consider – the Fed has just hiked the overnight rate by a half percentage point – that’s after a quarter-point hike last month – so some loans are going to be even more expensive than they were at the beginning of the year. 

#5 Are you Willing to put up Collateral?

Depending on your credit score and other factors, some lenders may require you to put up collateral or even a personal guarantee. Collateral would include the liquid assets of your business such as your equipment, business savings and/or investments and future invoices. 

Some may even want you to give a personal guarantee that you’ll pay back the loan by putting up some of your own assets as collateral, such as your house or your personal investments, in case you default on the loan.

Putting up collateral may increase your risk in taking out a loan, but keep in mind that lenders really aren’t interested in seizing your assets – they would much rather see your business succeed and for you to pay back the loan in a financially healthy manner. Therefore, when you’re taking a loan, it’s imperative that you sit down with your lender and carefully go over the terms of collateral and the exact steps that will be taken should you default. 

Carefully Weigh Your Options

Before you take out a business loan, it’s always a good idea to consider other ways to raise money besides going into debt. Crowdfunding, asking for outside investments, borrowing money from family are other options. If you do decide to take out a loan, carefully consider the above questions and decide which loan will help your business the most and which would be most cost-efficient.

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Decoding SBA’s Lending Reforms for Disadvantaged Small Businesses

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The US SBA is giving small businesses operating in low-income and rural areas a boost when it comes to lending, as it has announced reforms to its Community Advantage (CA) Pilot Program – a lending program designed for 11.2 million small businesses in economically disadvantaged zones. 

These small businesses especially suffered during the height of the pandemic, as more than 500,000 of them were forced to shut their doors, displacing millions of workers in low-income and rural communities. 

The SBA’s CA program was launched in 2019 to encourage Community Financial Development Institutions – lenders specializing in supporting small businesses in economically disadvantaged communities – and other participating lenders to lend up to $25,000 in unsecured loans and offered lending levels of up to $250,000. The program was set to expire in September 2022, and a four-year moratorium on new lender applicants was set in place. 

Changes Made

According to a joint announcement from the SBA and the Biden Administration, the new reforms to the program include:

  1. Extending the program to September 30, 2024.
  2. Lift the four-year moratorium on new lender applicants to increase the amount of capital being offered by the program.
  3. Allow participating lenders access to the SBA’s popular 7(a) loan government-guaranteed loan program at lending levels up to $350,000 from $250,000.
  4. Allow small business owners with criminal backgrounds to apply for funding through the program. 
  5. Ease collateral requirements for borrowers and increase the maximum loan size to $35,000 from $25,000.
  6. Allow participating lenders to offer lines of credit, interest-only periods and other loan modifications.

Which Businesses are Eligible?

SBA Loan small business rural Kapitus

Small businesses operating in rural areas could get a big boost from reforms to the SBA’s Community Advantage program.

The move should help small businesses in low-to-moderate income (LMI) and rural communities that often struggle to find lending. The businesses that are eligible to participate in the program are:

  • Low-to-Moderate Income (LMI) communities.
  • Businesses where more than 50% of the full-time workers are low-income workers or workers who live in LMI census tracts.
  • Empowerment Zones and Enterprise Communities – communities that are identified by the federal government as an areas in which there is a high level of poverty and economic distress where businesses may be eligible for federal grants and tax incentives.
  • HUBZones – Areas that are identified by the SBA in which small companies operate and employ workers in historically underutilized business zones. 
  • Businesses in operation for less than two years, since roughly 20% of small businesses, on average, fail after two years.
  • Businesses eligible for SBA Veterans Advantage Program.
  • Small businesses in rural areas.

For loans through the CA program, the SBA will provide 85% loan guarantees for up to $150,000, 75% for loans greater than $150,000 and 90% for international trade loans. The maximum interest rate for these 7(a) loans is prime plus 6%, and the turnaround time for getting the loan is five- to 10 business days.

More information on these loans can be found on the SBA’s website.

Reforms to the CA program should benefit pandemic-ravaged small businesses and could boost the US economy. According to the Brookings Institute, small businesses with less than 500 employees are responsible for providing roughly 65% of the jobs in non-metropolitan counties in the US, while small businesses with less than 50 employees account for 42%. 

Statistics for small businesses operating in LMI communities are scant, but the SBA released a report in February identifying nearly 6,800 small businesses operating in HUBZones. According to a past report from the Economic Justice Fund, there are 11.2 million small businesses operating in low-income communities. In both rural and low-income communities, small businesses can be a major source of jobs that can lift individuals out of poverty and aid in community development.

Who are the Lenders?

Several different types of lenders can sign up to participate in the SBA’s CA program. The most prolific are community development financial institutions (CDFIs) – lenders that specialize in serving small businesses in economically disadvantaged communities such as LMI neighborhoods and rural areas. According to the Opportunity Finance Network, there are approximately 1,200 CDFIs nationwide that manage over $222 billion in lending to small businesses and new homeowners. These types of lenders must be certified with the US Treasury Dept. 

They are not the only lenders, though. Others include microloan program intermediaries, as well as intermediary lending pilot (ILP) program members. Local and regional banks can also register to participate in the program, as well as alternative lenders. Some financial institutions do shy away from participating in lending to businesses in LMI areas given the heightened risk, however.

Lending institutions can register with the SBA to participate in the CA program online. Small businesses that are eligible to participate in the program can find a list of qualified lenders on the SBA’s website.

Don’t Miss Out

If your small business operates in a rural area or underserved community, you’d be well-advised not to miss out by taking advantage of these reforms. As the economy is still feeling the effects of the pandemic, rising inflation and worker shortages, now is probably a great time to seek financing to get you through.

Term loan duration small business lending

What Should the Duration of Your Term Loan be?

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If you’re ready to apply for a term loan for your small business, you want the terms of your loan to be as unique as your business. That said, one of the most important factors you should look at when taking on a term loan is…how long should your loan last? In the world of small businesses, the general impression has been that term loans offered by both banks and alternative lenders are typically short-term, usually with a maximum duration of 24 months. 

That has changed in recent years, however, as more banks and alternative lenders, such as Kapitus, have begun offering a new option to small business borrowers – term loans extending up to 60 months. In some cases, long-term loans may offer benefits for established small businesses such as a lower fixed payment. 

What Factors Should You Consider?

There are several factors to consider when determining what the duration of your loan should be. Additionally, the factors you should consider for a 60-month loan may be different than the ones you would consider for a loan that is 24 months or shorter. 

Josh Jones Kapitus small business lending

Josh Jones, Kapitus’ Chief Revenue Officer, said the duration of your term loan should be a major factor when deciding to get financing.

“If you’re able to get something approved outside of two years, you have a different decision as a business owner,” said Josh Jones, Kapitus’ Chief Revenue Officer. He added that when a small business owner is considering taking a loan of 24 months or shorter, they should examine what they are using the borrowed assets for and when they expect a return on those assets. 

For example, if your business is borrowing money to develop and market a new product that will be introduced to consumers in two years, then maybe a 24-month loan makes more sense for you. 

“For something 24 months or shorter, you have to look at your needs, and kind of do some liability matching to what the use of the capital is and whenever it is a return is going to happen,” said Jones.  

If you’re considering a 24-month loan, you should take into account the total amount that you would be paying back the lender over two years, and the fact that new debt will most likely be available to you, if needed, once you’ve paid off the loan. 

“Typically, debt payment coverage based on the use of the money is a big thing,” said Jones. “Or the fact that I know I have regular needs for capital. If I know my business can support that regular payment, I may not want anything longer than 24 months because I always want an available credit limit.”

Factors to Consider When Going Long

When considering taking a loan longer than 24 months, there are several factors that you need to consider the the total cost of the loan. If you apply for a term loan that will be paid back over 60 months, for example, the total interest will be higher on that loan because the lender is taking on longevity risk – the risk that your business may not still be around in five years. After all, the average lifespan of a small business in the US is 8½ years, according to NAV.

Are you, the borrower, willing to pay more for a five-year loan than a 24-month loan? The answer to this depends on your ability to consistently make payments, and what you are using the borrowed assets for. 

“With total cost, the shorter you go, the more the total cost goes down,” said Jones. “It is possible that the annual percentage rate (APR) of a 24-month loan will be more, but business owners should be more concerned about the total cost of financing, not just the APR. I’m borrowing this money, what is my total payback? If I can reduce the cost, if my business can support the payment, or my opportunity supports the payment of my debt, then that’s going to be the winning factor.”

With a longer-duration loan, you need to carefully consider:

  1. The amount you will be paying each month. Generally, the total cost of a 60-month loan will be greater than that of a 24-month loan (of the same amount). Therefore, if you need to borrow assets, and your cash flow only allows you to pay a limited amount of debt service coverage every month, a long-term loan may make more sense since the fixed payments will be lower than a short-term loan. 
  2. Prepay Options. If you take out a 60-month loan and you want to pay it back in full in 24 months, you may have a few options in terms of the total cost of capital. Some lenders will charge you a prepay penalty by charging you the interest you would have paid had the loan gone to term. Other lenders may give you a prepay discount – they’ll discount the amount of interest you would have owed had the loan gone to term. In either case, you should carefully examine which option would be cheaper for you when you set the terms of the loan. 

What Should I Use a 60-Month Loan For, and How Do I Qualify?

You can use the proceeds of a 60-month loan on anything you choose for your business, and the amount

term loan duration small business financing

Carefully consider the total cost of capital with a long-term vs. a short-term loan

taken out for a long-term loan is typically higher than a short-term one. 

Generally speaking, proceeds for a long-term loan are usually spent on permanent assets for your business, which could include the purchase of property, office equipment, office furniture, computers and company vehicles. Perhaps you need a long-term loan to acquire a well-established business to complement your own.

Be aware that the requirements and underwriting process for obtaining a loan beyond 24 months are more stringent than a standard two-year loan, mainly because the lender is taking on that longevity risk. 

“Even if you have a great credit score, it can be very difficult for a business to get a 60-month loan unless they have [many] years in business,” said Jones. “That’s because the likelihood of a business [that’s well established] making it another five years is much higher than a business that’s shorter. It’s not meant to be insulting to anyone’s good business, it’s just the way the stats play out.”

Talk to Your Financing Specialist

The duration of your term loan will depend on several different factors; but, like with most loans, your ability to pay the loan back will usually be the key. Examine your balance sheet and cash flow history, and talk to the financing specialist about whether lower payments over a longer time horizon may be a better option for your business.

Two hands handling a credit card in front of a portable computer.

Finding the Right Business Credit Card with No Annual Fee

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Having reliable business credit is a valuable tool for day-to-day operations. As needs pop up at your business, having a business credit card on-hand can make a tough situation easier to deal with. Business credit cards, however, come in many shapes and sizes. And some of those cards on the larger side may have benefits or perks not suited to the way you do business. In addition, these cards often have an annual fee, making your business credit card yet another expense. However, if your small business is looking for a business credit card without a ton of extra bells and whistles, there are several practical card options that have no annual fee. Because no two small businesses have the same credit card needs, this list is in no order of preference; only you, the business owner, will be able to determine the card best suited to you.

 The Blue Business® Plus Card from American Express

It’s not often American Express finds itself on a list of “no annual fee” offerings, but in recent years American Express has expanded beyond their premium Gold and Platinum cards to offer several competitive basic credit cards. The Blue Business Plus Card from American Express has both no annual fee and 0% APR for the first year. After the first year, American Express will determine cardholders’ APR based on their credit and several other relevant factors. This card, for having no annual fee, has an incredibly lucrative points deal too: up to $50,000 annually, the Blue Business Plus Card doles out double points on nearly all purchases and potentially more points for travel booked through the American Express portal.

Like their premium card offerings, American Express gives Blue Business Plus cardholders a unique kind of buying power. According to AmEx, “There are no over-limit fees, no enrollment steps to take and you can continue to earn Membership Rewards® points or cash back on purchases above your credit limit.” The one catch is that balances over your existing spending power must be paid along with your monthly minimum.

Bank of America® Business Advantage Customized Cash Rewards Mastercard®

If you’re more interested in cash back than points, you may want to look at offerings from players like Bank of America. The Business Advantage Customized Cash Rewards Mastercard by Bank of America offers a great opening bonus: cardholders can get a $300 statement credit after spending at least $3,000 in the first 90 days after opening their account. In the long term, as well, the Business Advantage card offers 3% cash back in the transaction category of your choice, 2% back on dining, and 1% back on all other purchases. Those 3% and 2% cash back deals, however, only extend to the first $50,000 in relevant purchases each calendar year. All of this, of course, with no annual fee and a  0% intro APR for the first year. APR after the first year will be determined based on cardholder credit and other relevant factors.

If you already have a Bank of America business checking account, BofA explains that “You can earn up to 75% more cash back on every purchase, if you have a business checking account with Bank of America and qualify for our highest Preferred Rewards for Business tier.” In essence, you can take advantage of both cash back deals at once, meaning those cash back numbers become 5.25%, 3.5%, and 1.75%.

Chase Ink Business Unlimited® Credit Card

Chase’s Ink cards get good press in the business world for good reason: these sensible cards have just about every benefit you could look for in a business card and are generally a safe, straightforward solution for businesses in need of a credit card that can handle daily expenses. The Ink Business Unlimited® card is a reasonably competitive offering in the “no annual fee” credit card space with more than sufficient perks: cardholders have unlimited 1.5% cash back on every business purchase as well as a 0% intro APR for the first year; APR afterward will be determined by (you guessed it!) cardholder credit and other relevant factors. Unlike Bank of America, Chase credit card rewards go through points like American Express; also, like American Express, Chase points can be redeemed for a multitude of business uses like straight cash back or travel expenses.

As of this article’s publishing, the Ink Business Unlimited card is offering $750 cash back for cardholders who spend $7,500 on purchases in the first three months after opening their account.

Capital One® Spark® Classic for Business

Anyone with a nose for business credit cards likely expected one of Capital One’s Spark® cards to make an appearance on this list. Capital One’s Spark® Classic for Business, unlike the other cards on this list, says upfront that business owners with “fair” credit are the most likely to be considered for the Spark® Classic. If you are concerned about applying for a higher-end card, this may be the card to consider: the Spark® Classic has unlimited 1% cash back, 26.99% APR, along with some more interesting perks: this card’s monthly minimum payment, according to Capital One, “…will be the greater of $15 or 1% of your balance plus new interest, late payment fees, and any past due amount.” This means that business owners looking to carry a balance may find the Spark® Classic to be a lucrative deal.

PNC Cash Rewards® Visa Signature® Business Credit Card

Nearly every “no annual fee” credit card tries to grab business owners’ attention with cash back and points promises, so don’t be surprised that PNC Bank is playing the same game. It’s the little differences that count, however, when choosing a “no annual fee” business credit card, so let’s take a look: the PNC Cash Rewards® Visa Signature® Business Credit Card offers unlimited 1.50% cash back on what they call “net purchases” which, according to PNC, means “The term ‘net purchases’ does not mean all transactions you may make using your credit card. Some limited transactions are excluded.” This card also has a 0% intro APR for the first nine billing cycles and then can range from 10.99% to 19.99% APR (based on the business owner’s credit and other relevant factors) as of the publishing of this article. PNC also offers a $200 cash back bonus for cardholders who make at least $3,000 worth of “net purchases” during their first three billing cycles.

Know Your Needs, Find Your Card

This market of credit cards is often a place for decimals and minor percentage differences; the less you pay in as a cardholder, the less you can expect to get out of your card. Small business owners, however, don’t have to feel like they’re settling when opting for “no annual fee” cards on the market today – having a line of credit with no annual fee can be a fantastic resource for both maintaining a higher credit limit overall and building your credit in general. Consider making a wish list of every process and action you would like your business credit card to complete. Then, make a list of deal breakers like certain APR or cash back percentages. Once you have everything written down, then get to business choosing the right cards for your needs. If any of the above cards speaks to your business needs, consider speaking directly with the bank or financial institution that offers the card, as they can likely help you to further determine if their card is the right choice for you.

What are the Different Business Lines of Credit, and Which One is Best for Your Business?

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Business lines of credit are incredibly valuable tools that offer flexible financing to help small business owners meet expenses and grow. Lines of credit, much like your personal credit card, have borrowing limits and make funds available to you when you need them. They also give you the option to pay down some or all the debt at various, pre-agreed upon intervals. You only pay interest on the amount that you’ve used, and most lines of credit will require you to bring your balance to zero at certain times. 

The benefits of having a line of credit are tremendous, and in some cases, businesses may not be able to survive without one. For example, seasonal businesses may use a line of credit to meet payroll during the off-season or to order inventory in advance of their busy seasons. Credit is also used in case your small business quickly needs emergency cash.

Before you apply for one, however, you should consider that a line of credit is not a one-size-fits-all product. There are different types of lines of credit that you should consider before deciding on which one is best for your business.  Some credit lines may offer higher lines of credit while others may require collateral..

Deciding on the right one for your business can be tricky, and it’s important to know the different types that are available to you, as well as the risks associated with each one:

#1 Secured Line of Credit

A secured line of credit is one in which you, the borrower, take on a significant amount of risk. In these types of credit lines, you will have to put up collateral, such as your business assets, personal savings, or surplus business cash; or, if your business is a pass-through business, your personal assets such as your home. In the event you can’t pay off your balance, the lender reserves the right to seize those assets. 

That said, there are distinct advantages to a secured line of credit over an unsecured line. First, since you’ve put up collateral, there is a good chance that your line of credit will be bigger than it would be with an unsecured line of credit. Second, since you’re the one taking on much of the risk with a secured line, you most likely will pay less interest. Third, you don’t typically need as high of a credit score as you would with an unsecured line of credit.

#2 Unsecured Line of Credit

An unsecured business line of credit is the more popular option for small businesses since this option requires no collateral, and the lender takes on most of the risk. Applying for an unsecured line of credit is often simpler than a secured line, and approval may be quicker. 

An unsecured line of credit typically carries the same payment requirements as a secured line of credit, but in exchange for taking on much of the risk, the lender will usually require a strong credit score to obtain one. Since it is unsecured, the spending limit may not be as high as a secured line of credit, and the interest rate may be higher than a secured line of credit.

#3 Business Credit Card

If you need to pick up the tab for a business meal or must purchase new office equipment such as a laptop computer or printer at a moment’s notice, a business line of credit would not be convenient for you since it could take days to transfer money from your line of credit to your account. A business credit card, however, is a very handy tool to fulfill immediate cash needs for your business. 

A business credit card works pretty much the same as a personal credit card – it could offer perks such as travel miles and cashback rewards and will be there when you need it. Business credit cards usually have fewer requirements to obtain than a line of credit, and they won’t tie up your personal assets as they don’t require collateral. 

The drawbacks compared to a line of credit, however, is that business cards usually carry a higher interest rate than a line of credit, and many of them charge an annual fee.

#4 Real Estate Line of Credit

If you’re in the business of buying and selling properties, such as a home flipper, for example, then you should consider a real estate line of credit. A real estate line of credit is similar to a home equity line of credit, which is credit based on how much equity you have invested in a piece of real estate. 

Real estate lines of credit work in a similar way to any other lines of credit. They can be either secured or unsecured, depending on your FICO score, and they allow you to buy a piece of property before you sell your existing property.

Choose Carefully

Before you decide to take out a business line of credit over another form of financing, you should carefully consider the reason you need to borrow money in the first place. Lines of credit are probably not good for long-term business needs such as the purchase of expensive but crucial equipment or an office lease, and typically carry higher interest rates than a term loan or other types of financing. 

 

If you have immediate cash needs or want cash available in case there’s an emergency, such as your air conditioner breaking down or a leaky roof in your office, then a line of credit is probably the best solution for you.

Two hands are near a laptop. One of the hands is pressing paper pulp product.

What Documents do I Need for a Small Business Loan

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Any small business owner seeking a business loan can tell you: there’s a lot more paperwork  than you’d guess between finding a satisfactory loan and getting your capital in-hand. While delays can happen for near-boundless reasons, it ought to be the prerogative of every small business owner to be certain those delays aren’t caused by insufficient documentation. All kinds of loans, small business or otherwise, require some amount of paperwork for consideration and eventual approval. While no two business loans are identical, before even considering a loan, small business owners ought to have these documents in good order. This list encompasses the basic requirements for one of the most frequently sought small business loans, the SBA 7(a) loan.  SBA loans have some of the most stringent and comprehensive documentation requirements, so if you’re prepared for this loan, you’ll likely be prepared for almost any loan!

 

Loan Application Form

This may sound obvious, but why not be thorough? Lenders generally require all people who own at least 20% of the applying business, guarantors, and sometimes managers to fill out some information on your application form. Each loan’s requirements are unique, of course, so be sure to check with your lender which members of your business must fill out the loan application form. The SBA’s 1919 Borrower Information Form is a good blueprint for what just about all lenders would like to know before partnering with your business.

 

Personal and Business Résumés

Résumés are important to the loan process; personal résumés reassure lenders of your character and experience while business résumés prove a history of business aptitude and success. For those applying for 7(a) loans, the SBA requires business owners to send résumés for each loan being applied for; this is a near-universal requirement when applying for loans from traditional lenders.

 

Business Plan + Overview and History

Your business plan must lay out – in exact detail – how the small business loan you are seeking will help your business. Whether you are planning to expedite growth through financing or you could simply benefit from more working capital, be certain that you are able to indicate exactly where the principal will go.

Your business overview and history should be a comprehensive retelling of your successes and shortcomings as a business owner. Take off the rose-tinted glasses and talk numbers – your job here is to convince lenders that your business has the potential to succeed and that you have the gusto to overcome unforeseen problems.

 

Loan Application History

Your loan application history often must include all loans you have applied for, not simply the loans that you have received. Include relevant contact information and reference numbers where possible.

 

Statements of Personal History and Financial Background

Unlike the earlier business overview and history statements, this requirement is much more straightforward. The statement of personal history (SBA Form 912) is a generally quite short form asking for basic information like your address and date of birth. SBA Form 912 also asks if you, the business owner, are under indictment, have been arrested recently, or have been convicted of a crime. While loans not guaranteed by the SBA won’t require the 912 form exactly, the form is a good template for questions most lenders are likely to ask.

Your personal financial statement (SBA Form 413) asks you to lay out your assets, collateral, sources of income, stocks and bonds, real estate, as well as nearly any financial liabilities you may have. This type of information usually factors into determining your repayment ability and creditworthiness, so it pays to be comprehensive.

 

Current Business Financial Statements

Organize and compile the following financial documents alongside your loan application:

  • Profit and Loss Statements from at least the last three years & Interim Profit and Loss Statements
  • Year-End Balance Sheet from at least the last three years & Interim Balance Sheets
  • Reconciliation of Net Worth to current day
  • Projected Financial Statement for at least the next 12 months

 

Business Income Tax Returns

In addition to your other financial documents, be certain that you have signed personal and business income tax returns for, at the very least, the past three years.

 

Business Lease

Have a copy of the current lease for your business. If you do not have an existing lease but plan to pursue one following your loan, organize with your landlord for them to provide a certification of a proposed lease.

If you plan to use the principal from your small business loan to purchase another business, there are more articles you will require:

  • Interim Profit and Loss Statements from the business you plan to purchase
  • Proposed bill of sale + list of assets from the business you plan to purchase
  • At least the two previous years of income tax returns from the business you plan to purchase

 

Business Certificate or License

Organizations like the SBA flatly require that your small business have a certificate or be fully licensed as a for-profit business to be considered for a loan. There are several benefits to seeking certification, but squarely among them is consideration for 7(a) loans. Alternative lenders will likely think highly, as well, of those businesses that have certificates and proper licenses.

 

The State of Small Business Loans and the Importance of Being Earnestly Organized

The meter-high stack of documents lenders expect from you aren’t for nothing. The information you provide on yourself and your business are meant to assess how likely it is that you will pay back lenders in a timely fashion. Seismic shifts in the business world are nothing new in the era of COVID-19. But an unexpected side effect of current trends is that lenders offering SBA secured business loans – or loans simply aimed at small business owners – are often looking for businesses with proven track records of timeliness and funding success. It looks even better for your small business when your loan application is well organized.

Keeping your financial and personal documents in an orderly, easy to access manner has benefits far beyond loan preparedness, but those small businesses who are earnestly on top of their current documents digitally and in print are often the most likely to make a positive impression on lenders which can never hurt.

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