You might be surprised to learn there are some 32.5 million small businesses across the US. This accounts for 99.9% of all businesses in the US.
29% of business owners say they got motivated to start their own small business because they wanted to be their own boss.
While starting a business in Oklahoma and being your own boss sounds exciting; it also comes with many challenges. You might guess the biggest challenge businesses face is finances.
In fact, 66% of small businesses face financial challenges with cash flow being the number one issue small business owners report.
Of course, whether you want to start a small business or grow your business, you need financial resources.
What options are available for a small business looking to get a business loan? What types of loans can a small business get when they're just beginning?
Read on to learn more about small business loans and the options that might work for you.
The US Small Business Administration or SBA offers many types of loan options for small businesses. Their goal is to support millions of small businesses across the US to grow and fuel the US economy.
The SBA offers several types of loans that can help small businesses, but you'll want to know your goals for seeking financing to get the best loan for you.
Like government-backed mortgages such as an FHA loan or VA loan, these business loans get backed by the SBA but paid by a lender you select.
The only time the SBA does direct loans to businesses is for disaster relief like the global pandemic or a hurricane, for example. You can visit the SBA loan page to be matched with a SBA lender in your area like Triad Bank.
Let's take a closer look at the SBA loan options.
7(a) loans are among the most popular options for SBA loans. This is often a great option if you need to make a real estate investment as part of your business.
The maximum amount of funding for a small business 7(a) loan is $5 million. This capital can be used for:
To apply for this loan, you'll need to demonstrate the need for the loan and your business must operate within the United States. The SBA will require information on equity that is already invested into the business. The business also can't be delinquent on any other government financial obligations.
To apply for a 7(a) loan, you will need SBA Form 1919, SBA Form 912, and SBA Form 413. SBA will also want to see other business documents like a profit and loss statement and a projected earnings report.
Be prepared to supply your income tax paperwork and paperwork from any loans you've applied for in the past.
504 loans are intended for a slightly different purpose than the 7(a) loans. A small business can get up to $5 million in loans through the 504 loans.
These loans are intended for fixed assets that facilitate growth and expansion for a small business. They can also be used to facilitate job growth in a company.
To be eligible for a 504 loan, your business must:
You would need to meet the other SBA guidelines like having an organized business plan, qualified management expertise, good character through previous business dealings, and the ability to repay the loan.
The SBA microloan program is intended to get smaller loans into the hands of small businesses. Microloans can be for up to $50,000, yet the average microloan is for only $13,000.
The SBA provides funds to not-for-profit intermediary lenders in the community so they can issue microloans.
To qualify for a microloan, you'll need to visit the individual lender, as the criteria may vary from lender to lender. Generally, they want some form of collateral and a personal guarantee from the business owner.
Microloans can be used for a variety of purposes. In fact, it's pretty open-ended. The intention is that the small business uses it to sustain and grow their business. Some uses might include:
You should know that a microloan can't be used to pay off existing debt or invest in real estate for the business.
Many financial institutions will offer their own business loan program. You would go directly to the lender to apply.
Often qualifying for these loans can be more difficult than applying for an SBA loan but if you have a successful business with a developed credit history and hope to grow your business in some way, standard business loans can be a great option for funding your business’ goals.
If you need a small amount of capital to get your small business going, a personal loan is an option. This is a loan that the owner would take out themselves on behalf of the business. Your personal credit history and financial standing is considered when applying for this type of loan.
Be sure to shop around for the best rates as some online lenders have been known to offer very high-interest rates on personal loans that don't require any collateral.
Starting a business in Oklahoma that you can call your own is exciting and full of challenges. Let us help you find the best loan for your business needs. Your financing doesn't have to be one of the hardest challenges you face.
Contact us today to get more information on the best loan options for your business.