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Starting a new business but not sure what you’ll need to do to help it succeed? Your local business development agency can offer invaluable expertise on everything from registration, planning, marketing, and more. 

Small business development agencies cater to both new and existing businesses alike, providing critical resources to help entrepreneurs launch, grow, or even retire their ventures. 

Ready to learn how to set up a small business or expand your company? Here’s everything you need to know about small business development agencies. 

What is a small business development agency?

A small business development agency offers a number of resources, typically in the form of free counseling and low-cost training programs, to help businesses startup or expand. [1] 

Many small business development agencies collaborate with seasoned[2]  business experts, providing one-on-one professional counseling, advising, and training to existing ventures and startups. Topics are wide-ranging and typically related to an entrepreneur's specific needs, such as funding, technology development, management, strategy, financial analysis, export assistance, market research, sales, and much more. 

Small business development agencies can also offer networking opportunities to collaborate with other local business and government leaders. Many of the services provided by small business development agencies are free of charge, although some training programs or workshops can feature a small fee. [3] 

The goal of these agencies is to help small businesses grow, improve productivity, foster innovation, and help empower local economies and generate job creation making them a priority for state and local governments. [4] 

The most renowned types of small business development agencies are Small Business Development Centers (SBDC), which[5] are typically hosted by local universities and funded by Congress through a partnership with the Small Business Administration (SBA). Most states have several SBDCs in major economic and urban areas. Some local governments also maintain their respective small business development agencies to service regional needs. [6] 

What’s the difference between small business development agencies and industry support groups?

It’s important to distinguish between small business development agencies and industry support groups. While the latter focuses more on the needs of specific industries, the former is geared towards a broader range of sectors. [7] 

Industry support groups are also mostly made up of existing businesses[8] , while small business development agencies cater to both existing ventures and startups alike. Both offer significant opportunities to small businesses and can be a powerful complement to one another.[9] 

How to find a small business development agency

You can find SBA-backed SBDCs by entering your zip code through the SBA’s interactive map for local assistance. You can also find regional small business development agencies through your state’s Chamber of Commerce or local government office. 

For a comprehensive look at state-by-state small business development agencies, use the following list as your guide. 

Small business development agencies state-by-state 

Almost all states have SBDCs that maintain multiple locations throughout a state and typically partner with local universities. There may also be a number of localized small business development agencies depending on your state and city. 

Alabama

Alabama Small Business Development Center (ASBDC): They provide one-on-one business advising and educational training for growing small businesses and startups. And they offer opportunities to secure financing and help along the way. Also, advisors can analyze your progress and create plans to further the business.

Atlas Alabama: Access free online resources for entrepreneurs and small business owners to find available state and local resources.

Alabama Small Business Administration( SBA): SBA offers assistance in launching new businesses, and managing and growing existing ones, and they help small business owners pursue and improve their business style and skills. 

National Federation of Independent Business: A member-driven organization that advocates for small businesses.

Alabama Small Business Resources: They make networking opportunities available for small businesses and help business owners get licensed in all 67 Alabama counties.

Alaska 

Alaska Small Business Development Center (ASBDC): They offer no-cost, one-on-one business coaching, workshops, and tools to grow or start a business, funding assistance and pre-launch coaching.

Small Business Assistance Center:They offer free business counseling, and they provide training and resources to grow for-profit and non-profit businesses.  

Arizona

Arizona Small Business Development Center (AZSBDC): Get business counseling, workshops, and training to grow or start a business. As well, you can get robust business analytics and help with future-planning.

National Small Business Association: Find networking opportunities, small business services, and special services for entrepreneurial retirees.

Arizona Small Business Administration: They provide funding, counseling, certifications, and networking opportunities to small businesses.

NFIB: Advocates for small business owners and providers of resources for budding entrepreneurs who want to learn more about sustaining a small business.

Arkansas

Arkansas Small Business and Technology Development Center (ASBTDC): They offer advisory services, training, events, market research, and data for business owners. And they offer one-on-one consulting.

Arkansas Small Business Administration (SBA): They offer counseling, certifications, connections, and disaster recovery to small business owners.

Arkansas Division of Emergency Management: Apply for small business disaster relief grants and loans.

Small Business Resources: A wealth of internal and external resources for small business owners.

Arkansas Business Navigator: Owners of start-ups can register for free business consultations.

California

California Small Business Development Center (CSBDC): The CSBDC offers businesses access to funding, human resources, marketing tools, e-commerce opportunities, accounting services, and many other business needs. They operate an extensive network of 45 small business service centers throughout the state. 

Small Business Development Corporation of Orange County (SBDC-OC): They help small businesses access capital to grow and they bring economic development for underserved communities in California.

The South Bay Entrepreneurial Center (SBEC): They provide business mentorship, educational resources, and commercialization consultations for university-developed technologies. They also offer jobs, funding, workshops, and the option to become a mentor or mentee.

California Manufacturing Technology Consultants (CMTC): A non-profit that offers consulting services to small and mid-size manufacturers in Southern California. Services include advice on how to increase sales, reduce costs, improve quality, workforce training, and more.

South Bay Workforce Investment Board (SBWIB): They offer specialized services to assist local companies to meet hiring goals, lower training costs, improve employee skill levels, strengthen retention rates, turnover rates, and more. They also help business owners succeed at job fairs.

Los Angeles Score: Score offers business advice, small business workshops, and numerous resources to help entrepreneurs start or grow a business.

Colorado

Colorado Small Business Development Center Network: They offer resources for small businesses, non-profits, freelancers, and independent contractors.

El Paso County Located in Colorado Springs, this organization offers business training to help new and existing businesses grow, including free one-on-one consulting and networking events.

Association of Women’s Business Centers: They provide women with entrepreneurial opportunities, training, and mentoring.

Operation Hope: Free coaching for Black business owners.

Connecticut

Connecticut Small Business Development Center: No-cost advisory and analytics services to help businesses access capital.

Connecticut Small Business Administration (SBA): Counseling, certifications, connections, and disaster recovery to small businesses. 

Chamber of Commerce: Free advice to business owners and networking events to grow Connecticut’s small business community and celebrate diversity. 

Connecticut Women’s Small Business Administration (WSBA): Opportunities for female entrepreneurs to grow their businesses.

Delaware

Delaware Small Business Development Center: No-cost advice and analytics for small businesses.

Delaware Division of Small Business: Over 300 programs for small business owners.

Delaware Area Chamber of Commerce: Support for small business owners in areas of market research, strategy, development, and future planning.

Delaware SBA: Counseling, certifications, connections, and disaster recovery for small businesses.

Florida

Florida Small Business Development Center: They offer resources and tools across all stages of business development to help entrepreneurs pursue their dreams.

Florida Business Development Corporation (FBDC): FBCD helps businesses secure SBA 504 loans for purchasing significant fixed assets, debt refinancing, and more.

Florida Small Business Administration (SBA): Find counseling, certifications, connections, and disaster recovery assistance to small businesses. 

Entrepreneurial Learning Initiative (ELI): This program educates and trains small business owners, academic, corporate, government, and nonprofit clients all over the world.

National Entrepreneur Center: NEC has offered one-on-one counseling and seminars to over 220,000 small business owners.

Georgia

University of Georgia Small Business Development Center: They support entrepreneurs by offering educational services and resources across 18 locations statewide.

National Association of Small Business Services: They focus on helping business owners open, grow, and manage their businesses with a unique hands-on approach.

Georgia State University - Atlanta Office: They offer free training programs as well as one-on-one coaching, workbooks, and other resources for startups and other small businesses.

GA State African American Chamber of Commerce: The main focus is on helping Black business owners to succeed in their small businesses.

City of Atlanta Local Business Support: They provide resources to train entrepreneurs to start or expand their businesses.

Georgia Minority Business Development Agency: The center for minority business owners.

Hawaii

Hawaiʻi Small Business Development Center: They offer business advisory, workshops, events, and market research to both budding and seasoned entrepreneurs alike.

Hawaii State Trade Expansion Program (HiSTEP): They help small businesses in Hawaii create an exporting strategy or expand their export development.

The Minority Business Development Agency (MBDA): MDBA offers access to market analysis tools, funding opportunities, business certifications, procurement guidance, and more for minority business enterprises (MBEs). 

Hawaii Small Business Administration (SBA): They provide counseling, certifications, connections and disaster recovery to small businesses.

Women's Business Center: They aid women to help start and expand their businesses.

Idaho

Idaho Small Business Development Center: They offer no-cost professional business counseling, and business resources, as well as specialized services on cybersecurity, environmental solutions, exporting, and government contracting. 

Research and Business Development Center: A place for entrepreneurial undergraduate students to get experience and build useful skills in the future.

Illinois

Illinois Small Business Development Center: They offer no cost, one-on-one business advising services as well as events, workshops, and other resources to help small businesses network and grow. 

Score Chicago: Score connects small business owners throughout Cook County with experienced entrepreneurs, corporate managers, and executives for no-cost business advising and mentorship. 

McHenry College: A grant-funded program that helps growing small businesses and offers free one-on-one counseling, monthly workshop courses, and resources for funding.

Indiana

Indiana Small Business Development Center (ISBDC): They offer no-cost business advising, training, referrals, and resources to businesses within every stage of their journey from startup to retirement.

One Southern Indiana: They provide resources to connect with other businesses and build community. OSI offers job opportunities, advertising, sponsorship, and other resources. 

Madison Chamber of Commerce: They offer support and resources to grow small businesses, non-profit organizations, individuals, and civic groups. 

Iowa

Iowa Small Business Development Center: They provide no-cost business advice and resources for growing and budding businesses.

Iowa Small Business Administration (SBA): They provide counseling, certifications, connections, and disaster recovery to small businesses. 

Iowa Non-profit Resource Center: They offer free resources to help small business owners expand their business through training and connecting with other entrepreneurs. 

DSM USA: They provide free resources to start-ups and small businesses through research, and partnerships with local, state, and national entities.

Kansas

Kansas Small Business Development Center: They offer no-cost business training and a host of services for businesses at every stage of development to retirement.

Cue Impacto HEDC: They offer funds to immigrant and/or Latino-owned businesses to help them overcome challenges they may face. 

PBA Builds: By implementing strategic initiatives to help small businesses at no cost, PBA Builds provides technical assistance to businesses through a consortium of partners, business development professionals, and experts.

Kansas Small Business Administration: They offer counseling, certifications, connections, and disaster recovery to small businesses. SBA provides assistance in launching new businesses, and managing and growing existing ones. 

Kentucky

Kentucky Small Business Development Center: They offer no-cost business coaching, planning tools, resources, and training to entrepreneurs. 

Kentucky Small Business Development Center: They offer free one-on-one consulting, and business management training, reference information, and research.

Kentucky Small Business Administration They offer counseling, certifications, connections, and disaster recovery to small businesses.

Greater Louisville Inc.: GLI helps to grow your business by providing connections, networking opportunities, and business knowledge to get ahead of competitors. 

Louisiana

Louisiana Small Business Development Center (LSBDC): By providing low to no-cost consultations, resources, and networking opportunities to new and growing businesses. 

Southeastern Louisiana University: By offering consultations, SLU assists in securing loans and funding, creates jobs and provides training to businesses.

Louisiana Small Business Administration (SBA): They offer counseling, certifications, connections, and disaster recovery to small businesses.

Maine

Maine Business Development Center: They offer free small business advising for entrepreneurs on a wide range of topics including business planning, credit and financing, marketing, management, financial analysis, and more. 

Maine Small Business Administration (SBA): They provide counseling, certifications, connections, and disaster recovery to small businesses.

Coastal Enterprises, Inc.: CEI provides financing for a variety of purposes, including working capital, equipment purchases, facilities expansion, and construction. They also specialize in financing mixed-use and affordable housing real estate development.

Mainstream Finance: They help with business plans and offer technical assistance for starting a business, business strategy, new product launches,marketing, finances, and other business issues.

Maryland

Maryland Small Business Development Center: They provide low to no-cost professional training services, free one-on-one business counseling, and assistance for accessing business funding. 

Maryland Business Express: They provide a host of resources and a directory for information on how to start, plan, manage, and grow your business. 

Calvert County Maryland: They provide a number of resources to support the growth and development of county businesses, including online listings and reports, confidential counseling, marketing assistance, and educational seminars. Look for their yearly state of the economy report.

Women's Net: They help women start and expand their businesses.

Massachusetts

Massachusetts Small Business Development Center: Find free business advice, low-cost educational programs, and other resources to entrepreneurs.

Massachusetts Office of Business Development (MOBD): They assist businesses relocating to Massachusetts and help growing businesses apply for funding and foster community development. 

MassDevelopment: They offer financing and real estate solutions for nonprofits and businesses across the state.

Massachusetts Alliance for Economic Development (MassEcon): They offer business development assistance through site finding, research, programming, and education.

Score Boston: They provide free counseling and mentoring to entrepreneurs starting or building a business in the greater Boston area through mentorship and workshops.

The New England Business Association: They provide businesses with access to exclusive-rate capital via a preferred vendor program, as well as networking opportunities. 

Center for Women & Enterprise: A nonprofit organization dedicated to helping people start and grow their businesses. 

Massachusetts Association of Community Development Corporations (MACDC): They provide training, technical assistance resources, and access to capital for small businesses located in inner-city and rural areas, as well as traditionally disadvantaged communities.

Entrepreneurship For All (EforAll): They foster entrepreneurial growth in mid-sized cities through pitch competitions, mentorship programs, business advice, and networking opportunities. 

Michigan

Michigan Small Business Development Center: They offer free counseling services for small businesses throughout the state.

Michigan Economic Development Corporation (MEDC): They provide small business assistance and resources.

Michigan Veteran Entrepreneur-Lab: A free three-month entrepreneurship for veterans or military spouses through funding, learning, and support.

PTAC: They offer training programs to small businesses including counseling, assistance with government registration, bid matching, and more.

Minnesota

Minnesota Small Business Development Center: They offer no-cost, customized consulting to businesses at all stages of the life cycle. 

Minnesota Small Business Assistance Office: They present individualized consultation services along with business guidebooks to ensure entrepreneurs have the information they need to succeed. 

Grant Watch: A resource to find grants offered to businesses in Minnesota from government agencies, foundations, and other organizations.

Mississippi

Mississippi Small Business Development Center: They offer one-on-one business counseling, training events, funding assistance, and more.

Mississippi Grant Watch: A resource to find  grants offered to businesses in Minnesota from government agencies, foundations, and other organizations.

Higher Purpose: Higher purpose offers to help Black business owners grow their new or existing businesses.

Alcorn: Women entrepreneurs and small business owners can find training, counseling, and access to capital.

Missouri

Missouri Small Business Development Center: They offer personalized services, knowledge, and resources to help businesses grow. 

Missouri Small Business Administration (SBA): They provide counseling, certifications, connections and disaster recovery to small businesses. 

Community Foundation of Central Missouri: Providing funds to women and business owners of color.

Kansas City G.I.F.T: Funds and training for Black business owners to help them expand their businesses and face unique challenges. 

Montana

Montana Small Business Development Center: They offer business development tools, guidance, and resources.

Bozeman Area Chamber of Commerce: Local, state, and national resources for businesses of all sizes.

Women's Net: Aid for women to help start and expand their businesses at no cost.

Nebraska

Nebraska Small Business Development Center: They offer a number of programs to help small businesses grow and access much-needed resources on a local, national, and regional level.

Nebraska Business Development Center (NBDC): They offer management and technical assistance to businesses in Nebraska — and especially to women-owned businesses.

Nebraska Small Business Administration: They offer counseling, certifications, connections, and disaster recovery to small businesses. 

Nevada

Nevada Small Business Development Center: They provide advisory services, educational resources, training programs, and assistance for businesses and start-ups. 

Northern Nevada Score: They provide free and confidential mentoring to entrepreneurs starting or growing an existing business.

Nevada SBA: They offer counseling, certifications, connections, and disaster recovery to small businesses. 

New Hampshire

New Hampshire Small Business Development Center: They offer business advisory services at no charge and a number of programs to help businesses prosper.

New Hampshire SBA: They offer counseling, certifications, connections, and disaster recovery to small businesses. 

Community Navigator: Critical resources for small businesses in their early stages that are run by women and other disadvantaged people.

New Jersey

New Jersey Small Business Development Center: They offer one-on-one counseling, training programs, networking events, and more to propel new and established businesses. Advisors also use analytics of your progress and create plans to further the business.

New Jersey Business Action Center: They offer free small business consulting as well as networking opportunities to connect with government leaders and fellow entrepreneurs. This includes mentoring, financial assistance, licensing, certification, and more.

New Jersey Community Capital: A resource for minority entrepreneurs and business owners.

New Mexico

New Mexico Small Business Development Center (NMSBDC): They offer no-cost counseling as well as assistance with small business matters.

New Mexico SBA: They provide counseling, certifications, connections, and disaster recovery to small businesses. 

Accion Opportunity Fund: They financially support and advance small businesses run by minority groups.

WESST: They provide entrepreneurs with resources, skills, and technical assistance to elevate their business through podcasts, workshops, and training programs.

New York

New York Small Business Development Center (NYSBDC): They offer free business advisory services in a number of different languages along with free and low-cost training programs, as well as other resources. 

NYC Department of Small Business Services (SBS): SBS connects entrepreneurs to free resources throughout NYC. They also offer advisory services on government regulations. 

SCORE: They provide mentoring to entrepreneurs starting or growing their existing businesses at no cost by offering connections to other entrepreneurs. 

NY Small Business Administration (SBA): They provide counseling, certifications, connections, and disaster recovery to small businesses. 

North Carolina

The Small Business and Technology Development Center (SBTDC): They help small businesses start and grow by offering advisory services and counseling, educational services and tools needed to build and grow.

Carolina Small Business Development Fund: A non-profit providing small business loans, training, and research to support entrepreneurs through research programs, emergency funds, and other resources.

Small Business Center Network: They provide business counseling, training resources, and more to help entrepreneurs launch and grow their companies. 

North Dakota

North Dakota Small Business Development Center: They serve both startups and existing businesses with advising services, training programs, resources for succession planning, and more. 

North Dakota Small Business Development Center: They offer consulting to small businesses with no cost with lists of events, news, and updates.

Ohio

Ohio Small Business Development Center: They provide a number of counseling services in areas of financial analysis, strategy development, market feasibility, and more to help businesses start and grow. 

Miami Valley Small Business Development Service: A confidential and free counseling service for small and medium-sized businesses. By coaching through goal setting, employee management, business planning, and more, they help small businesses.

Ohio Small Business Development Center at Kent Start Stark (OSBDC):This is a low-cost program for new and established small businesses. Services include orientations, one-on-one counseling, workshops, and more.

Oklahoma

Oklahoma Small Business Development Center: They offer no-cost, confidential business advisory services, as well as workshops and technical assistance. 

Oklahoma Small Business Administration (SBA):They offer counseling, certifications, connections, and disaster recovery to small businesses. 

Oregon

Oregon Small Business Development Center: They deliver business advising, classes, and access to resources small businesses need to start and grow. 

Small Business Development Center: They provide expert advice with no cost to small businesses. Services include bookkeeping, business plans, finances, sales, marketing, social media and more.

Lane Small Business Development Center (LSBDC): They offer free professional business advice for Lane County residents with small businesses. Some services include courses, confidential one-on-one counseling and submitting questions to a team.

Pennsylvania

Pennsylvania Small Business Development Center: They provide no-cost consulting services and educational programs for small business owners and entrepreneurs.

Business One-Stop Shop: They offer a host of resources to startups, growing businesses, and companies looking to move to Pennsylvania. Resources include information on writing business plans, naming a business, registration, basic overviews, and more. 

Entrepreneur Works: They provide low-cost loans to businesses as well as training, workshops, coaching, and more throughout Philadelphia and Chester. 

Women’s Business Enterprise Center: They offer resources to help female entrepreneurs launch and grow their businesses. 

Score Philadelphia: Score grants free business advising services as well as mentoring and networking opportunities for entrepreneurs through workshops and provided specifically for black-owned businesses.

Rhode Island

Rhode Island Small Business Development Center: They offer free to low-cost seminars and training workshops to help businesses start and grow. They also provide information on starting a business, training webinars, and more.

Rhode Island Small Business Administration (SBA):They offer counseling, certifications, connections and disaster recovery to small businesses. 

Rhode Island Small Business Development Center: They offer no-cost professional business counseling, and business resources, as well as specialized services on cybersecurity, environmental solutions, exporting, and government contracting. 

South Carolina

South Carolina Small Business Development Center: They present individualized, confidential, and free business consulting for entrepreneurs alongside other critical resources. 

South Carolina Small Business Administration (SBA): They offer counseling, certifications, connections, and disaster recovery to small businesses. 

Shop HERE:They offer free training to start and develop a small business with services including online support, free domain registration, one-on-one coaching, and more.

South Dakota

South Dakota Small Business Development Center: SDSBDC hosts a number of programs and resources to help with starting and growing a business. 

South Dakota Small Business Development Center: They offer free consulting to new and existing businesses by providing research, case studies, resources, programs, and more.

South Dakota Small Business Development Center:They assist existing businesses to stay up to date with competitors. Services include free consultations, training, business planning, marketing, technology development, regulatory compliance, and more.

Tennessee

Tennessee Small Business Development Center: They provide free and confidential one-on-one counseling for startups and existing businesses. Services include free consultations, training, business planning, marketing, technology development, regulatory compliance, and more.

Tennessee Small Business Development Center (TSBDC): They offer free and lost cost options to grow small businesses and help them network, with 400 clients served, and 300 trained.

Tennessee Small Business Administration (SBA): They provide counseling, certifications, connections, and disaster recovery to small businesses. 

Texas

Texas Small Business Development Center: They operate 60 centers throughout the state offering free and low-cost resources helping businesses start and grow. Services include free consultations, training, business planning, marketing, technology development, regulatory compliance, and more.

The Dallas Entrepreneur Center (The DEC): They help entrepreneurs and freelancers in North Texas start, build, and grow their businesses. The free membership program offers mentoring and networking opportunities.

Score Dallas: They offer one-on-one mentorship with leading business experts, networking opportunities, workshops, and more throughout Dallas.

Utah

Utah Small Business Development Center: They offer free one-on-one counseling and management resources to start, grow, and improve local businesses. Services include free consultations, training, business planning, marketing, technology development, regulatory compliance, and more.

The Utah Innovation Center: The catalyst for technology innovation in the State of Utah.

Center for Rural Development: Works with Utah’s rural counties, communities, and businesses, providing economic development resources. The Center is the home of the Rural Opportunity Program and assists with other programs to help local governments and businesses grow and prosper.

Vermont

Vermont Small Business Development Center: They offer business advising and critical resources for new and growing businesses.

Vermont Small Business Development Center: They offer free business counseling to new and existing small businesses. Services include advice on export, digital strategy, funding, hiring, training, and more.

Vermont Small Business Administration (SBA): They offer counseling, certifications, connections, and disaster recovery to small businesses.

Virginia

Virginia Small Business Development Center: They provide no-cost individualized advising to both startups and established businesses.

Virginia Department of Small Business and Supplier Diversity: They provide educational resources and to help businesses grow and access capital. 

Virginia Small Business Administration (SBA): They provide counseling, certifications, connections and disaster recovery to small businesses. 

Washington

Washington State Small Business Development Center: They offer advising services, training, applied research, and more to local businesses. Services also include free consultations, training, business planning, marketing, technology development, regulatory compliance, and more.

Washington Minority Business Development Center: They provide technical assistance and business consulting to established minority-owned businesses throughout Washington state.

American Small Business Chamber of Commerce:They provide contractors, news, resources and opportunities for small business owners to grow and sustain their business.

U.S Chamber of Commerce: They are working towards policies and regulations that benefit small businesses in America to strengthen the economy. 

West Virginia

West Virginia Small Business Development Center: They offer one-on-one business coaching as well as no-cost technical assistance to new and growing businesses. Services also include free consultations, training, business planning, marketing, technology development, regulatory compliance, and more.

Small Business Development Center: They offer no-cost business coaching, workshops, and resources including developing a business plan, marketing, hiring, training, bookkeeping, and more.

West Virginia Small Business Administration (SBA): They offer counseling, certifications, connections, and disaster recovery to small businesses. 

Wisconsin

Wisconsin Small Business Development Center: They provide consulting and business education services to help entrepreneurs start, manage, and grow their businesses. 

Women’s Net: They offer grants for women who own small businesses.

Grant Finder: They provide a list of various kinds of grants that are offered to business owners, old and new.

Wisconsin Small Business Administration (SBA): They provide counseling, certifications, connections, and disaster recovery to small businesses. 

Wyoming

Wyoming Small Business Development Center: They connect expert small business advisors with entrepreneurs for no-cost, confidential assistance. They also provide classes, training programs, the ability to view pre-recorded webinars, and more.

Wyoming Business Council: They offer resources to help businesses start, grow, and obtain financing. They also provide leadership, policy, and investment information.

Wyoming Small Business Administration (SBA): They provide counseling, certifications, connections, and disaster recovery to small businesses. 

Grant Finder:They provide a list of various kinds of grants that are offered to business owners, old and new.

When you review financing options for your business, you’ll likely discover that some lenders want you to sign a personal guarantee. A personal guarantee can help reduce a lender’s risk when it loans money to a business. Yet as a borrower, that same arrangement can put your personal finances in a vulnerable position. 

It’s important to understand how personal guarantees work and the risks you’re agreeing to accept before you sign on the dotted line. This small business owner’s guide to personal guarantees will show you the basic details you need to know on the topic. Once you have more information, you’ll be better equipped to make an informed decision about your business financing options.

What is a personal guarantee?

A personal guarantee is a special provision you might find in a business financing agreement like a small business loan, a business line of credit, etc. The provision states that the business owner (or owners) agree to accept personal liability for their company’s debt. 

If your business borrows money and fails to repay those funds (plus interest and fees), a personal guarantee allows the lender to go after your personal assets to recuperate its investment. So, at least in some ways, providing a personal guarantee is like agreeing to be a co-signer for your business.

Why do lenders require personal guarantees?

You won’t face personal guarantee requirements with every type of business financing. But many business lenders do ask small business owners for personal guarantees when their companies apply to borrow money. The reason lenders make such requests has to do with risk. 

Thanks to how business loans work, there’s a level of risk involved anytime a lender loans money to a borrower. There’s a chance the borrower will fail to repay the debt as promised and that the lender could lose money in the process. 

A lender can try to offset this risk and remain as profitable as possible in a few different ways. For example, lenders will review your creditworthiness when you apply for financing. If you or your business have good credit, you might find it easier to qualify for a loan. 

Another way lenders can manage risk is by asking business borrowers to provide collateral to “secure” the loan, line of credit, or business credit card they are seeking. And, of course, some lenders ask for personal guarantees to encourage business borrowers to repay their debts (and to provide additional resources for collections if they don’t).

Pros and cons of signing a personal guarantee.

There are benefits and drawbacks to signing a personal guarantee. Here are some of the pros and cons you should consider before you agree to put your name (and personal assets) on the line for your business. 

Pros

• There may be more financing options available to your business if you sign a personal guarantee—especially if you have good personal credit. 
• You might have better approval odds if you’re willing to sign a personal guarantee. 
• Signing a personal guarantee might help you lock in a better interest rate for small business financing. 
• Your business might be able to get a loan without collateral if you provide a personal guarantee. 

Cons

• You risk losing your personal savings, home, vehicles, and more if your business defaults on its debt. 
• Your personal credit score and credit history could be damaged if the business falls behind on its credit obligation—and your business credit might suffer, too.
• Even if you sell the business (or sell your interest in the business), your personal guarantee on a debt will likely carry on until the account is closed and satisfied in full. 

No one can predict the future. Should your business be unable to repay its credit obligations for any reason, you could pay the price with your personal wealth, if you agreed to sign a personal guarantee. If that risk makes you uncomfortable, you should probably search for other ways to finance your business.

Ways to avoid personal guarantees.

Many lenders ask for personal guarantees when you apply for business loans—especially if your business is still in the startup phase. But if you’re wondering how to get a business loan without signing a personal guarantee, there may be other options available to you. 

• Work on establishing good business credit. Building business credit is a process. So, the sooner you can start, the better. 
• Search for loans without personal guarantee requirements. With certain types of business loans, like SBA loans, personal guarantees are not negotiable. Yet a few lenders may be willing to loan your business money without requiring a personal guarantee in return. However, every lender is different. So, if you prefer a business financing option that you can obtain in your company’s name—instead of your own name—be sure to do your homework. 
• Supply collateral. If your business has collateral that it can pledge to secure a loan, those assets could reduce the risk involved for the lender. As a result, your company might find it easier to find secured financing options without a personal guarantee than unsecured financing. 
• Consider a blanket business lien. Another way to reduce a lender’s risk when you borrow money is to sign a blanket business lien. A blanket lien gives the lender permission to take possession of all of your company’s assets and resell them in the event of a default. Agreeing to a loan offer that includes a blanket lien is also a high-risk way to secure financing, but it’s the business—rather than the business owner—that’s absorbing most of the risk in this scenario.
• Be aware of a confession of judgment. A confession of judgment is an additional document provided as part of your loan contract package that waives the business owner’s right to a legal defense before a court and allows a lender to go after a business’s assets if the business defaults on the loan. Including this clause is illegal in some states and Lendio does not work with lenders that include one. 

It can be difficult to borrow money for your business or even establish business credit without accepting some personal liability in the process. Lenders tend to be more comfortable working with companies when business owners are willing to put some “skin in the game.” 

However, it’s not impossible to find alternative financing solutions that do not require personal guarantees, if this is the borrowing approach you prefer. 

Consider the benefits and drawbacks of accepting personal liability for business debts up front. Some business owners are comfortable with taking on personal risk in exchange for more attractive financing options. Others are not. Only you can decide whether a personal guarantee is something that you’re willing to chance for the sake of your company.

In addition to being a great source of extra income, a side hustle makes an excellent stepping stone to running your own full-time gig. Still, even though this freelance gig or contract work may just be a part-time job, you can protect yourself from some costly legal mistakes by first ensuring your enterprise is compliant.

So, what does “compliance” mean for a side-hustle? 

States and municipalities require that all small businesses — no matter their size — abide by specific laws and regulations. Yes, even a side hustle selling homemade soaps or jewelry needs to abide by laws. Failure to follow local rules and regulations can lead to fines or loss of privileges.

Why Business Compliance Is Vital for Your Side Hustle

Business compliance allows state and federal governments to maintain a sense of order. It’s intended to protect you, your business, and your customers. Most compliance involves filing and retaining paperwork, although there are some exceptions. To simplify the compliance process, you can break compliance down into 2 categories: external requirements and internal requirements. 

External requirements include everything from filing and paying federal and state taxes to completing necessary paperwork. This is the category of requirements that most business owners are likely to remember because the consequences are more direct and familiar — think late filing fees or penalties.

Internal requirements can be a bit trickier. These include documents and records that you may be required to keep on file at your place of business, like copies of information sent to the federal and state government. You’ll need this information on hand if you ever decide to sell your business or apply for funding or loans. 

Incidentally, good recordkeeping — of both internal and external requirements — will keep you safe with the government and safeguard you in case anyone decides to take legal action against your business. 

Compliance documents do one more thing, too: they show you’re acting according to federal and state laws and following industry standards, which adds legitimacy to any organization.

Tips for Keeping Your Side Hustle Compliant

Keeping your side hustle compliant gives you the peace of mind of knowing you’ve satisfied all requirements so you can run your enterprise with confidence. While compliance requirements vary from state to state and business structure, there are some universal requirements you can expect.

Employer Identification Number (EIN)

Are you operating your side hustle as an LLC or corporation? Then you must have an EIN, which you can obtain from the IRS. If you went down a different road and chose to operate as a sole proprietorship, you can choose between using an EIN or your social security number. 

Business License

No matter where you run your side hustle, most municipalities require that you have a license to practice business, whether in your city, county, or state. This holds true for sole proprietors, too. Business licenses generally need to be renewed yearly or semi-annually.

Franchise Taxes

If you run an LLC, corporation, or, in some cases, a sole proprietorship, you may need to pay a franchise fee or franchise taxes — even if your business isn’t actually a franchise (the term “franchise” has multiple connotations and/or meanings). This varies by state and is generally only required when you sell physical items.

Federal Taxes

As the saying goes, the only things certain in life are death and taxes. All businesses are required to pay federal taxes, including income and employer taxes. If you’re just starting your business, you may want to discuss your operating plans with a small business tax advisor or CPA.

Annual Report or Biennial Statement

If you operate as an LLC or corporation, most states require that you check in once a year or every two years. Luckily, the state should let you know when your annual or biennial reporting is due. Check the date carefully: the due date of your report/statement could be the anniversary of when you formed your business or it could be another date entirely.

When you file for the first time, you need to submit an initial report after you’ve incorporated as an LLC or corporation. There will generally be a deadline date for filing this first report, too.

Report or Statement Filing Fees

Biennial statements and annual reports also usually require paying mandatory filing fees.

Articles of Amendment

Making changes to your company, such as changing its name, adding officers, or updating its address? You’ll need to report these changes in your company’s articles of amendment and abide by any state requirements for notification, voting, and filing.

Certificate of Good Standing

Once you ensure that your side hustle possesses all of the required documents to run a business, consider obtaining what is known as a Certificate of Good Standing. This document verifies that your company is in full compliance with local and state laws and regulations. The certificate may be required when you open banking accounts, apply for financing and licenses, and executive contracts. You’ll also need a Certificate of Good Standing if you decide to sell your business.

Certificates of Good Standing contain your company’s official name, including any DBA. The document confirms that you are authorized to conduct business in your area by verifying that your company is current on fees and taxes and that you have filed all necessary reports.

LLC and Corporations — Special Requirements

Running a corporation means tracking additional compliance requirements including shareholder and director meetings and maintaining written meeting minutes. In general, corporations require complex management practices that might not be ideal for entrepreneurs taking their first steps with a side hustle. 

Deadlines for Filing Certifications, Permits, and Licenses

It’s essential to keep current on any certifications, permits, and licenses that apply to your business. It’s advisable to check with your local government for applicable deadlines and add them to your calendar so you don’t miss a deadline. When you do, it usually means more work and possible fines.

What If Your Business Isn’t in Good Standing?

If your side hustle isn’t in good standing, you’re looking at several negative consequences. You could be responsible for fines, late fees, and other penalties. Worst yet, you could find it difficult, if not impossible, to open bank accounts, apply for licenses, secure financing, and execute contracts. If that wasn’t enough, lenders are unlikely to finance companies not in good standing.

Taking Your Side Hustle Full Time

At some point, you might find it’s time to make your side hustle a full-time gig. If you’ve been working your side hustle as a sole proprietor and want to make it your full-time job, now may be the time to apply for an LLC. It is also an excellent time to open a business banking account if you’ve been using your personal account, which will help separate your business and personal finances, too.

If you take this step, don’t risk administrative dissolution by being noncompliant. Dissolution will leave you personally exposed to company liabilities. The best way to prevent this is to address compliance issues ASAP. Plus, this will ensure your company is in good standing and lets you focus on running your incredible business.

_{The views and opinions expressed in this blog are those of the authors and do not necessarily reflect the official policy or position of Lendio. Any content provided by our bloggers or authors are of their opinion and are not intended to malign any religion, ethnic group, club, organization, company, individual or anyone or anything. The information provided in this post is not intended to constitute business, legal, tax, or accounting advice and is provided for general informational purposes only. Readers should contact their attorney, business advisor, or tax advisor to obtain advice on any particular matter.}

There are numerous ways to secure business capital, and debt financing is at the top of that list. With debt financing, your business borrows money from a lender—often in the form of a short term loan or business line of credit—and agrees to repay those funds plus interest in the future.  

The right business loan or line of credit can come with many benefits. Business financing might enhance your cash flow, provide you with working capital, or give your company the financial flexibility it needs to expand. 

Yet it’s also important to understand what your business will be agreeing to repay when it borrows money, and how that new debt relates to what your business already owes. Therefore, it’s wise to calculate the cost of debt before you seek new business financing.

What Is Cost of Debt?

When a lender or debt holder extends credit to a business, it’s making an investment on a future return. In other words, the lender expects to receive compensation for the risk it’s taking at some point in the future. 

Cost of debt is the term that describes how companies repay the lenders and creditors from which they borrow money. Cost of debt is the effective interest rate a company pays to creditors—also known as debt holders or lenders. 

Others may want to know your company’s cost of debt figures, because it can help them assess the risk of doing business with your company. For example, if your business is trying to attract new investments or apply for certain types of financing, investors or lenders may want to know your company’s cost of debt to assess the financial stability of your business. 

As a business owner, you may want to calculate cost of debt as well. Knowing your cost of debt can help you make sure your current business debts aren’t putting your company under too much pressure and can help you to determine whether or not it’s wise to borrow additional money for your business.

How to Calculate Cost of Debt

Before you calculate the cost of debt for your company, you will need to gather some information. Here’s what you need to get started:

• A list of the outstanding debts your business owes. 
• The APRs your business owes on each of its debts. 

You may have to estimate some of the figures above, since the debt your business carries throughout the year may fluctuate. This may be especially true if you have business lines of credit or business credit cards with revolving balances. Your overall debt figures may also experience some variations depending on whether you have fixed or variable interest rates.  

Next, it’s important to understand that there are multiple ways to calculate cost of debt. Two of the most common approaches to the cost of debt formula are to calculate the after-tax cost of debt and the pre-tax cost of debt. Below is a closer look at the cost of debt formula for each option. 

Pre-Tax Cost of Debt

To figure the pre-tax cost of debt for your business, start by adding your total interest expenses for the year. Then, divide that figure by your total number of business debts. 

Here is an example. 

Imagine your business has three debts:

• Business Loan A: $50,000 at 4% APR
• Business Loan B: $50,000 at 7% APR
• Business Loan C: $100,000 at 5% APR

In this scenario, then, your total debts would equal $200,000.

Next, assuming the loans above all have fixed interest rates, you would calculate the total annual interest expense as follows. 

• $50,000 X 4% = $2,000
• $50,000 X 7% = $3,500
• $100,000 X 5% = $5,000

Add up the three interest amounts for the debts and your total annual interest expense would equal $10,500.

Finally, you input all of the figures above into the cost of debt formula. 

In the example above, the pre-tax cost of debt—also known as the effective interest rate—that your business is paying to service all of its debts throughout the year would equal 5.25%. 

After-Tax Cost of Debt

Now let’s consider the after-tax cost of debt. The after-tax cost of debt is how much your business pays for its debts after you factor in the cost of taxes. 

Many interest charges are tax deductible for businesses. (Note: You should talk to a reputable tax advisor for advice on any specific tax-related matters.) So the after-tax cost of debt calculation is the more common figure that business owners, lenders, and would-be investors will likely want to review. 

To calculate the after-tax cost of debt, you will need to use the following formula. 

As you can see, this formula picks up where the pre-tax cost of debt formula left off. In other words, you must use the first formula to calculate the effective interest rate before determining the after-tax cost of debt. 

Below is an example of an after-tax cost of debt calculation to help you visualize how the process works. 

Building on the example above, let’s still assume that your business has an effective interest rate of 5.25%. Since tax rates vary for different businesses, for the sake of this exercise, let’s also just assume that your business is paying a 9% corporate tax rate. 

Now, let’s take a look at how the numbers align in this hypothetical after-tax cost of debt calculation. 

So, in the example above the after-tax cost of debt is 4.77%.

Why Does Cost of Debt Matter?

Choosing the right financing solutions for your company can have a meaningful impact on its bottom line. Avoiding financing can stall business growth and cause you to miss out on valuable opportunities for growth and expansion. Yet, if you overextend your business financially and its cost of debt grows too high, that can create problems of its own. Therefore, it is important to take the time to do some careful research before you seek financing and find the right balance that works for you. 

Cash flow analysis is essential for effective business management. It helps you recognize opportunities to improve profitability, anticipate periods of low cash inflows, and use your funds strategically when they’re limited.

Conversely, ignoring your cash flows can lead to significant liquidity problems, one of the leading contributors to business failure.

Here’s what you should know about performing cash flow analysis to optimize your business decision-making and avoid working capital issues.

What is Cash Flow Analysis?

A business’s cash flow refers to its capital receipts and disbursements during a given period. In addition to the cash earned and spent in day-to-day operations, it includes funds gained and lost through investing and financing activities.

As a result, cash flows are distinct from revenues and expenses, especially for businesses using the accrual accounting basis. For example, you could close a deal on net 30 terms and generate sales, but not receive any cash for weeks.

Cash flow analysis requires that you organize the inflows and outflows from your business activities into a statement of cash flows—one of the three primary financial statements—along with the income statement and balance sheet.

Next, it involves applying analytical techniques to the assembled data to extract beneficial insight, such as seasonal cash flow trends, opportunities to reduce expenses, or signs you need additional financing.

For example, variance analysis is a technique that involves creating an estimated cash spending budget for an upcoming period, then comparing it to your actual results.

That helps highlight aspects of your operation where costs were significantly different than you expected, giving you the chance to address the issues or refine your cash flow forecasting.

How to Do Cash Flow Analysis

Cash flow analysis is complex and encompasses several distinct processes. Here’s a step-by-step guide to give you a general framework for how it works.

1. Identify All Inflows and Outflows

The first step to analyzing your cash flows is to track them. If you already have an income statement and balance sheet, you can use them to back into your inflows and outflows. Otherwise, you can pull the information from your bank statements.

The cash flow statement generally separates these activities into the following groups:

• Operating activities: These include the cash inflows you generate by selling your products or services and the cash outflows you incur as operating expenses.
• Investing activities: Investing cash outflows include the purchase of investments like fixed assets and securities. Meanwhile, investing inflows refer to any returns they generate and the proceeds you get from selling them.
• Financing activities: These refer to the cash flows associated with your debt and equity financing. The proceeds you receive are inflows, while repayment activities are financing outflows.

Every business has a unique combination of cash activities, so you may not have some that fall into every category. After all, some small businesses go without external financing or choose not to invest their excess capital.

2. Create a Statement of Cash Flows

Once you’ve identified all your cash activities for the period you want to analyze, you’ll need to organize them into a statement of cash flows. You can create the financial statement using the direct or indirect method.

The direct method of calculating cash flows is straightforward, but it’s often labor-intensive. It involves adding up all your cash inflows and subtracting all your cash outflows from them, using raw transactional data from bank statements.

The indirect method of calculating cash flows can be more complex, but it’s usually more efficient if you have a finalized income statement and balance sheet.

Generally, it involves backing into your cash flows by removing accruals and non-cash activities from the other financial statements. For example, you’d need to reverse any accounts receivable, accrued revenues, and depreciation.

3. Investigate Your Statement of Cash Flows

Whether you use the direct or indirect method, you should end up with the same statement of cash flows. With it, you can finally begin your cash flow analysis. Here are some sample techniques to give you an idea of how it works:

• Calculate your cash runway: Your cash runway is the length of time you can support your current cash flow, usually expressed in months. It’s highly relevant to new startups losing money and trying to gain traction and equals your cash reserves divided by monthly net cash flows, assuming they’re negative.
• Check cash flow ratios: Ratios can help you assess solvency, liquidity, and profitability. For example, the cash flow coverage ratio tells you if your operating cash flows are enough to afford your debt payments. If it’s greater than one, your default risk is low. It equals net operating cash flows divided by total liabilities. 

There are countless ways to extrapolate information using your statement of cash flows. Which techniques are relevant to you depends on your goals, business model, and current stage of growth.

If nothing else, you can use it to determine whether your company is generating sufficiently high net cash flows over a given period. Without it, that’s not always obvious to businesses using the accrual method of accounting. 

4. Use Insights to Inform Business Decisions

Cash flow analysis is only beneficial if you use the insight you gain to make better business decisions. As a result, you should monitor your statement of cash flows and review it before making significant decisions.

For example, businesses often benefit from ongoing financial forecasting. It involves creating projected financial statements, including the statement of cash flows, using historical data.

Updating these projections at the end of each calendar year helps you develop benchmarks and predict potential cash flow shortfalls. If you foresee that you’ll need additional working capital, you can start looking for financing.

Of course, you should examine your statement of cash flows further before accepting a credit offer to confirm you have enough cash flow to make your monthly payments.

Cash Flow Analysis Example

Let’s walk through an example to help you understand how cash flow analysis looks in practice. For the sake of simplicity, we’ll use the direct method to construct a manageable statement of cash flows.

Say you’re a small business owner in the construction industry and primarily take on landscaping projects. In January of your third business year, you have the following cash transactions:

• January 3: $500 rent expense for landscaping equipment
• January 7: $5,000 cash receipt as payment for an invoice
• January 10: $200 payment toward an outstanding business loan
• January 16: $1,250 payment to subcontractor
• January 27: $50 gas expense to refill the company truck
• January 30: $3,250 cash receipt as payment for a second invoice
• January 31: $120 dividend payout from invested securities

Fortunately, you’ve been performing cash flow statement analysis for several years. As a result, you recognize that your net operating cash flows are 20% higher than in January of the previous year.

In addition, you notice that your cash reserves have grown steadily along with your operating cash flows. This month, you’ll have $10,000 left after setting cash aside for taxes and personal expenses.

You like to keep enough cash to support four months of cash outflows without income. Since your total cash outflows in January are $2,000, you realize you don’t need more than $8,000 in cash reserves.

Based on your cash flow analysis, you use your excess funds to invest in a $2,000 commercial-grade lawn mower. It saves you $200 monthly in equipment rent, improving your operating cash flow.

Leverage Software for Cash Flow Analysis

Cash flow analysis is an essential part of financial planning for small businesses. However, building your cash flow statements in clunky spreadsheets is time-consuming, labor-intensive, and prone to human error.

Fortunately, you can manage your cash like a pro with Lendio’s cash flow forecasting software. It can track your activities in real-time, automatically generate cash flow statements, and provide personalized cash flow insights. Sign up for a free trial today!

A commercial loan is a type of financing available to businesses. General commercial loans can be used for any business-related expense, from payroll costs to expanding to a new location. There are also specialized loans used for specific purposes, like buying equipment or acquiring another business.  

Read on to learn more about how commercial loans work and how to choose a financing structure that best meets your business needs.

Commercial Loan Definition

So what is commercial financing? It's when a business borrows money from a financial institution. Here's how commercial loans work. The business receives a lump sum to be used at the owner's discretion. The funds are then repaid over time according to the conditions of the loan agreement. The lender charges interest that is added to the loan balance and included in the payments. Depending on the type of commercial loan, payments could be made daily, weekly, or monthly. 

In order to qualify for a commercial loan, businesses apply using their credit scores (often including the owner's personal credit score), revenue, and time in business. Different lenders may have different requirements and request additional types of documentation. They may also request that you offer some type of asset as collateral for the loan. 

4 Types of Commercial Loans

These are four of the most common types of commercial loans to consider as a starting point for your business financing needs.

SBA Loans

Government-backed SBA loans help connect businesses with financing opportunities for a number of different purposes. These types of loans are notorious for their lengthy application review periods, which can stretch out several months. Loan amounts go as high as $5 million, with competitive interest rates and repayment terms that can last anywhere between 10 and 30 years. Most SBA loan programs also require a 20% down payment on the loan so that you're heavily invested in the success of the business. 

There are several different types of SBA loans to consider. A 7(a) loan is the most common one and the funds can be used for general purposes. Smaller 7(a) loans (under $25,000) don't require any collateral. SBA 504 loans are used to purchase a specific asset, like a building or machinery. 

Term Loan

Term loans can either be short-term (lasting less than two years) or long-term (lasting as long as 25 years). In most cases, these loans come with a fixed interest rate and consistent monthly payments so you know exactly what you'll pay back each month. If you use an online lender, you can often get approved and funded in just a couple of business days, making these an attractive option for businesses needing fast cash. A term loan can also help you better predict cash flow since the payments are consistent each month. 

The application process varies depending on the lender. A traditional financial institution, like a bank, may have a longer review process compared to an online lender. Also find out how long it takes to receive funds after your application is approved.

Commercial Real Estate Loan

Also called a commercial mortgage, a commercial real estate loan is designed to help your business purchase property. This could be an office building, retail store, warehouse, manufacturing facility, restaurant space, or other type of real estate. Loan amounts are typically large and the term length is extended to make payments more affordable. 

In addition to purchasing a property for your business, you can also use a commercial real estate loan to refinance the terms of an existing commercial mortgage or renovate a property you already own. If you dream of owning or expanding space for your company, a commercial real estate loan can help you do that. 

Business Line of Credit

Rather than giving your business a one-time injection of capital, a business line of credit gives you access to credit when you need it over a period of one to two years. It acts like a credit card in that you can draw on your credit line as needed and pay interest on your balance, rather than the entire available amount. 

A business line of credit can be an ideal type of commercial financing in a number of scenarios. For starters, a line of credit can be used for financial emergencies, like broken equipment that needs to be replaced. It can also help cover ongoing expenses, like payroll, especially if your revenue is inconsistent throughout the year. Finally, a line of credit gives you agility to act on opportunities as they arise, without having to apply and wait for financing in the future.

Pros of Using a Commercial Loan

Business loans can be a great way to manage and grow your company. Here are some of the primary benefits of using a commercial loan.

Access to capital: When your business’ current cash flow is not enough to get through slow periods or ramp up for busy seasons, getting a commercial loan gives them access to the capital to do so. And because there are so many different types of business loans out there, you can find one that's structured for your business needs. 

Faster growth: Taking on debt doesn't automatically mean your business is in trouble. In fact, many businesses often use debt to accelerate growth and take advantage of new opportunities to expand.

Retain full ownership: There are many ways to raise funds for your company, including taking on external investors. But with a commercial loan, you get to retain full ownership of your company.

Cons of Using a Commercial Loan

There are downsides to consider as well before you decide to apply for a commercial loan. 

Application process: The application process can be intimidating, and there's no guarantee you'll get approved. Be prepared to put in a little elbow grease. But if your business financials are already in order, then you may not have much to worry about. 

Interest and Fees: There's no such thing as free money, and you'll have to pay interest and fees on your borrowed funds. Weigh the benefits you expect to receive and make sure you can afford the payment terms, even in a worst-case scenario. 
Cash flow crunch: Making loan payments can be tough on your cash flow. Consider all the obstacles your business may face and how well you could maintain those payments before making a decision on your business loan.

Does commercial financing sound like a good fit for your business?

Apply for a small business loan and compare offers with Lendio.

Re-entering the workforce can be difficult after serving jail time as a convicted felon. Not only do felons lose their ability to vote and serve on a jury, they can also have difficulty finding a job to support a new positive lifestyle. Starting a business may be an opportunity to start fresh, but there may be some roadblocks when it comes to scaling growth. Understanding small business loan opportunities for felons can make the path to successful financing much easier.

Small business loans for felons.

Felons will have a harder time finding loans they are eligible for, but there are still some limited options available through the SBA.

SBA loans

SBA loans are backed by the Small Business Administration, which incentivizes lenders to work with qualified borrowers. Felons aren’t automatically denied, but there is an additional form you’ll have to fill out to be evaluated by your lender. Keep in mind that not all lenders who offer SBA loans will work with felons, and those who do will have very strict requirements.  

Qualification questions include if the applicant is currently facing charges (an automatic disqualification), if they have been arrested in the past six months, convicted of or pled guilty or no contest to a crime, or are currently on parole or probation. The applicant is then required to provide details regarding the charges and sentencing along with documentation that all fines and court conditions have been met.

There are a variety of SBA loans to explore, which can be used for things like purchasing real estate, buying equipment, or expanding or purchasing a new business. Most SBA loans are designed for established businesses rather than start-ups. 

Grants & other financial resources for felons.

In addition to taking out a business loan, it’s also worth exploring alternative options to raise capital for your company, including grants, investors, and crowdfunding.

Federal grants

Businesses owned by convicted felons are eligible for federal grants from Grants.gov. That’s because eligibility is based on the business’s background and proposals, not personal finances or history. Business grants are different from loans in that they don’t need to be repaid. Grants are listed on behalf of federal agencies, like the National Institutes of Health or the Environmental Protection Agency, to perform work or research on their behalf.

State grants

There are a number of state resources available through individual states. Most states have an economic development administration that receives federal grant funding to pass on to small business owners. Some of these may be specific to regional areas; for instance, you may find funding opportunities if your company operates in a designated rural region.

Entrepreneurship programs

Large corporations often sponsor programs to help launch and scale emerging businesses. They might provide grant funding or provide free products and services. FedEx, for example, hosts an annual program in which the winners are awarded a cash grant, plus services from FedEx. 

Angel investors

Angel investors are private individuals who use their own wealth to fund companies, often in exchange for equity. They’re currently the largest source of business capital in the U.S. And while you may need to disclose your criminal history as part of your pitch, they’re typically more focused on your business concept and growth opportunities than your background. There are several online platforms that connect entrepreneurs with angel investors, and of course, it’s also good to network locally. 

Crowdfunding

Two of the most common types of crowdfunding campaigns are rewards-based crowdfunding and equity crowdfunding. With the first option, you post a business idea and seek funding from individuals in exchange for a tiered system of rewards. With equity crowdfunding, you take money in exchange for partial ownership of the company. Most crowdfunding platforms require you to set a financial goal and won’t release any funds unless contributions reach that amount.

Resources for felons

HelpforFelons.org

HelpforFelons provides information and resources on how to find a job, housing, or start your own business when you have a criminal record.

Inmates to Entrepreneurs

Inmates to Entrepreneurs offers a free eight-week course to anyone with a criminal background who is interested in starting their own business.

freegrantsforfelons.org

This online resource provides information on housing, education, and jobs for felons.

If you’re looking to make a significant investment in your business, you might consider applying for a long-term business loan. These loans come with low interest rates and fixed repayment terms, so they’re a stable form of financing for companies of all sizes.

However, it’s important to understand the different types of long-term loans and long term financing available and the pros and cons of taking one out. This article will serve as a guide to finding and applying for a long-term business loan. 

What Are Long-Term Business Loans?

A long-term business loan is a loan you’ll repay over a specific period of time. The average repayment term lasts between 5 and 7 years, but some loans come with terms up to 25 years. 

Long-term loans are typically used to finance a major investment in the company—for example, for the purchase of real estate or equipment, or the hiring of additional employees. When you take out a long-term business loan, you’ll receive the money for such a purchase in one lump-sum payment, which you’ll then repay over time. 

These loans are usually best for established businesses with good credit history. And the application process can be quite lengthy—when you apply, you can expect to submit the following documentation:

• Social Security Number 
• Personal and business tax returns
• Personal and business bank statements
• Employer Identification Number (EIN)
• Proof of business registration
• Business plan
• Profit and loss statement
• Cash flow statement
• Balance sheet

Long-Term vs. Short-Term Business Loans

Occasionally, your business may need a quick infusion of cash to help you get through payroll or manage your working capital needs. In this scenario, it may make sense to apply for a short-term business loan.

The biggest difference between short-term and long-term business loans is that long-term loans are designed for long-term investments. In comparison, short-term loans can help you meet your immediate financial needs. 

Short-term business loans are usually available in smaller amounts and have to be repaid in less than a year. These loans also typically come with higher interest rates than long-term business loans.

However, the application and approval process is less extensive than that of long-term loans. And it may be easier for startups and borrowers with poor credit to qualify for a short-term business loan. 

Types of Long-Term Business Loans

There are several different types of long-term small business loans available depending on your business’s needs. Here are four different loan types you can choose from. 

SBA loans

An SBA loan is a business loan that’s backed by the Small Business Administration (SBA). Since the SBA partially guarantees the loan, this lowers some of the risk to lenders. 

And these loans often come with low interest rates and lengthy repayment terms. SBA loans come in all shapes and sizes, with loan amounts between $500 and $5.5 million and repayment terms between 5 and 25 years. 

However, SBA loans can be difficult to qualify for and the approval process can take a long time. If you decide to go this route, you should expect to provide your lender with extensive paperwork. And it may take several months for you to receive the funding for your loan.  

Bank Loans

Another option is to apply for a term loan through a bank. Like SBA loans, bank loans come with low interest rates and lengthy repayment terms, making them an affordable way for small businesses to get access to financing. 

However, these loans are best for established businesses with excellent credit history. You can expect to provide a lot of documentation when you apply, and the approval process will take longer than other types of loans. 

Equipment Financing

Equipment financing is a form of business financing that’s used to purchase business-related equipment or machinery. These loans can be a good option for heavy equipment needs, like restaurants and manufacturing and construction firms.

This business financing allows you to purchase the expensive equipment you need, and break the cost into manageable monthly payments. And since the equipment serves as collateral for the loan, equipment financing may be easier to qualify for. 

Commercial Real Estate Loans

A commercial real estate loan is a loan used to purchase property for your business, like an office, warehouse, or retail location. These loans are offered by the SBA, banks, credit unions, and online lenders. 

Commercial real estate loans can be used to purchase new property, renovate an existing location, or even refinance your real estate debt. These loans are available up to $2 million, and usually come with repayment terms between 5 and 20 years. 

Pros and Cons of Long-Term Business Loans

A long-term business loan can help you finance a major business investment, but it isn’t the best choice for everyone. It’s important to understand the pros and cons of these loans before applying. 

Pros

• These loans typically come with lower interest rates and fixed payment terms.
• Long-term business loans come with low fees compared to other types of loans.
• Most lenders don’t put any restrictions on how you can spend the funds.
• These loans can help you build your business credit. 

Cons

• These loans come with a lengthy approval process, especially if you apply for an SBA loan.
• It may be hard for borrowers with poor credit to qualify for a long-term business loan.
• Lenders usually prefer to give long-term business loans to established businesses.
• You may be required to put down some type of collateral to secure the loan. 

How to Qualify for a Long-Term Business Loan

Here are the four steps you’ll take to apply for a small business loan.

Decide Which Type of Loan You Need

There are several types of long-term business loans you can choose from. The one that’s best for you will depend on where you’re at in your business and what you plan to use the funds for.

For instance, if you’re an established business and are looking for low rates and flexible repayment terms, you may want to consider a bank or SBA loan. If you need to purchase equipment or large machinery, then equipment financing may be the right choice for you.  

Start the Application Process

Once you know what type of loan you need, you can start the application process. Depending on the type of lender you work with, you’ll either complete this online or in-person. 

When you apply, the lender will ask for some basic information about you and your business. They will also check your credit score to determine how risky you are as a borrower. A low credit score doesn’t necessarily rule you out from qualifying for a business loan, but you may receive a higher interest rate. 

Provide the Necessary Documentation

Next, you’ll have to go through the approval process and provide the necessary documentation. The exact documents required and timeline for approval will depend on the lender you’re working with. 

For instance, online lenders tend to offer a shorter approval process and faster funding. Whereas if you’re applying with a bank or the SBA, you can expect the approval and funding process to take much longer. 

Compare Your Options 

And finally, you don’t want to just take the first business loan that’s offered to you—it’s a good idea to compare loan offers from several different lenders. Comparing your options will help you find the loan with the best rates and terms. You should also consider any fees those lenders charge, like origination fees, late fees, and prepayment penalties.

Comparing your loan offers is easier when you use a service like Lendio. With Lendio, you apply for a loan once and receive offers from multiple lenders. 

The Bottom Line

A long-term business loan is a loan that’s repaid over a specific period of time. You’ll receive a one-time lump sum payment, which you can use to invest in long-term business growth. 

If you’re looking for a way to compare small business loan options, you may want to consider using Lendio. We offer a variety of small business loans, including SBA loans, term loans, cash advances, and much more. 

We offer a secure online application process, and you’ll receive loan options from our network of over 75 lenders. This will help you find the right business loan for your situation.