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Alabama is famous for its top-ranked college football teams, but Alabama is also well-known for its highly competitive communities of small businesses. And just like the coaches that support the sports teams, Alabama’s small businesses have the support of a broad group of lenders willing to make loans to aid the growth and development of these businesses.
Small businesses in Alabama are engaged in a diverse range of industries that include manufacturing, biotechnology, healthcare, agriculture, mining, and the businesses that support their employees, such as restaurants, dry cleaners, trucking, and lawn care. Fortunately, Alabama’s banks and credit unions have the broad experience needed to arrange all types of loans to support these small businesses.
Loans arranged through and guaranteed by the U.S. Small Business Administration (SBA) are popular with small businesses because of their lower interest rates and flexible repayment terms. The SBA offers both short- and long-term financing.
Lines of credit (LOCs) are useful forms of financing because of their flexibility. LOCs are short-term loans or advances made against a maximum limit. You will pay interest only on the amount that you borrow for the duration of the time until the advance is repaid.
Purchases of fixed assets—such as machinery, vehicles, and real estate—are best financed with term loans. With term loans, you receive all of the money up front to be used to purchase the long-term assets. Term loans are repaid in fixed installments over several years.
Equipment loans and leases are set up to finance specific pieces of equipment or machinery, which are used to collateralize the financing. Loans usually require a down payment, but with a lease, you can finance the total amount. Both types of financing have fixed monthly repayment terms which can range from a few months to several years.
If you’re selling to your customers on extended credit terms, there may be times when you need the cash before your clients have paid their invoices. In these situations, you can use your accounts receivable as collateral, and a lender will make an immediate advance of 70% to 90% of the invoice value. You will receive the balance of the invoice when your client pays.
Small businesses in Alabama have access to traditional lenders, such as banks and credit unions, in addition to other types of financing resources.
Alabama Credit Union makes loans at attractive rates to small businesses to use for building and property purchases, equipment purchases, and buying vehicles for business use, in addition to setting up credit cards to pay for business expenses.
LiftFund is a nonprofit organization that uses donated funds to finance small businesses that are underserved by the traditional lending community.
Regions Bank is a nationally recognized bank that provides a full range of services for small businesses, such as lines of credit, term loans, cash management systems, and SBA loans.
The Alabama Small Business Capital (ASBC) assists healthy, growing companies secure SBA 504 loans.
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Small businesses in Alabama not only have reliable sources of financing, but can also get advice from several organizations and join networks that will connect them with other entrepreneurs and business executives.
SCORE is a nonprofit organization staffed by former business executives who are available to mentor and provide management advice to aspiring entrepreneurs. The Alabama Small Business Development Center has advisors who can help small business owners with strategic planning, business planning, financial cash flow projections, and the creation of marketing systems.
Certain types of businesses in Alabama may qualify for grants.
The Innovate Alabama Supplemental Grant Program awards grants to small businesses that have developed cutting-edge technologies that are ready for commercialization. In addition, business owners can search for other types of grants that may be available for Alabama companies through the federal website Grants.gov.
To qualify for a small business loan in Texas, you need to officially launch your business Texas-style. You need to choose a structure for your business—sole proprietorship, corporation, or LLC (limited liability company). Usually, incorporated businesses have to register with the Texas Secretary of State, while sole proprietorships often register with their county, so be sure to check your local regulations before conducting business. In many cases, you will also need a business license from the Texas Business Permit Office.
Before submitting your application for a loan, you should connect with your lender and determine what types of documentation they need and any other requirements. One requirement will be to decide on a business structure. You can start out with a sole proprietorship if the business consists only of yourself and maybe one or two other employees. If you are going to incorporate or form a limited liability company, you will need to confirm the name availability and register the business with the Alabama Secretary of State.
To improve your chances of qualifying for a loan, you will need to assure the lender that you have a legitimate and practical use for the funds, that the lender will have sufficient collateral to secure the loan, and that there is a very high probability that the loan will be paid back within the terms of the agreement. To establish this credibility, you’ll need to present documentation describing how the funds will be used and cash flow projections that clarify that the loan will be repaid even if certain returns and revenue levels are not achieved.
Loans are structured around the use of the funds and the sources of repayment. Online platforms, like Lendio, can provide experienced financial consultants who can analyze the business owners’ situation and make recommendations as to the ideal financing options for your business.
Long-term loans that have installments paid over several years are used to finance the purchase of fixed assets, such as machinery, real estate, and acquisitions. These loans are repaid out of the cash flow generated by the fixed assets being financed.
Funds needed to fill temporary gaps in cash flow are typically financed with short-term loans or revolving lines of credit. Short-term financing is repaid with the conversion of current assets in the cash flow cycle.
Business loans help fund a company’s operations, growth, and development. It’s often difficult to finance a company completely with owner’s equity and investors’ contributions. Besides, when you borrow money to finance your business, you don’t have to give up any ownership of your company, which you would have to do if you had accepted money from outside investors.
An SBA preferred lender is a lender that’s been approved by the Small Business Administration to administer SBA loans without additional approvals from the SBA. Typically these lenders have years of experience and can approve SBA loans faster than non-preferred lenders.
SBA loans are backed by the government and offer lower interest rates than other types of small business loans. They typically require a minimum time in business of two years and a credit score of 650+.
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