How To Get Small Business Loans for Your Ohio Startup
Ohio’s economy is powered by small businesses, with 99.6% of the state’s various enterprises fitting into this category. If you are planning to join this incredibly important sector, or are already a part of it and require financing to help you grow, a small business loan is what you need to help you take those next steps. If you don’t know how to access small business loans, this guide will help you get started.
Determining Your Loan Needs in Ohio
The first step is to determine what your exact small business financing needs are. Why do you want to borrow money - and how much will you need? Is it startup capital you are looking for, or financing for a specific project? The key is to borrow enough money to finance your plan, but not so much that it exceeds your ability to repay. It is important to conduct an accurate cost analysis of your project so you can apply for the correct amount.
SBA Loan Requirements
Due to the importance of small businesses in the state and national economy, the government offers its support to startups through the Small Business Administration (SBA). The SBA enables the provision of finance to small businesses by offering partial guarantees on the financing that private banks and other lending institutions offer. By assuming some of the lender’s risk, the SBA supports banks and empowers small business owners who may not qualify for traditional loans. There are two primary forms of SBA loans - the SBA 504 (mainly for the purchase of fixed assets such as real estate) and the SBA 7(a) (designed for general business financing).
To qualify for an SBA loan, the applicant must:
- Be an operating business
- Operate for profit
- Be located in the US
- Fit the defined size requirements of a small business
- Not be a specified ineligible business such as a non-profit organization, financial institution, life insurance company, foreign enterprise, gambling operator, or private club
- Not be able to access financing on other terms
- Be creditworthy and demonstrate the ability to repay loans
Different Types of Small Business Loans For Startups
SBA loans are among the most popular options for small businesses in Ohio, but there are some other possibilities to consider. These include:
- Short-term business loans
- Working capital loans
- Merchant cash advances
- Business line of credit
How Do SBA Loans Work in Ohio?
Although the loan application process may vary depending on the lender, the basic procedure is as follows:
- Determine how much financing you need. Estimate the costs of your project and let that be the basis for your application.
- Check your eligibility. Start by checking your credit score, as well as your (or your company’s) ability to repay a loan.
- Make sure you have all the required documentation. You will need proof of identity, such as your driver’s license, federal tax ID, or passport. You will also require copies of your business license, bank statements, tax returns, and business financial statements.
Do SBA Loans Require Collateral?
Some small business loans are unsecured. When it comes to SBA loans, however, the need for collateral depends on several factors. Collateral is a consideration - but not the only consideration - in an SBA loan application. On the whole, the SBA does require collateral on its loans. However, if your application looks good in every other respect, but you lack sufficient collateral, it may still be approved. Under the SBA’s guidelines, “assets such as equipment, buildings, accounts receivable and (in some cases) inventory are considered possible sources of repayment if they can be sold by the bank for cash.” Both business assets and personal ones may be considered as collateral for a loan.
Consumers National Bank is an SBA-Award-winning bank that provides small business loans in Ohio. For information on how to get small business loans, contact us today. We will be happy to take you through the process and help you determine your eligibility for the business financing you require.