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Ohio is known as the Buckeye State for its abundance of hardy buckeye trees. Ohio is also known for its abundance of resilient small businesses, which employ over two million people in the state. These small businesses need capital for getting off the ground and expanding their markets.
Ohio is friendly to small businesses because of its moderate tax environment and lack of overreaching regulations that can stifle a company’s growth. Fortunately, Ohio also has an abundance of commercial lenders and nonprofit organizations that are anxious to help small business owners grow their operations and hire even more people.
The partial guarantee issued by the Small Business Administration (SBA) makes it easier for private lenders to extend loans to small businesses because it lowers their risk. As a result, SBA loans generally have lower interest rates.
A line of credit is used to provide short-term funds during periods of temporary negative cash flow. Interest is only charged on the amount borrowed and can be paid back out of future cash flow.
Lenders extend term loans for a business to purchase fixed assets (like buildings or real estate), add to working capital, or finance a marketing program. The loan is repaid in fixed installments over several years.
Equipment finance loans make it possible for small businesses to purchase expensive pieces of equipment rather than having to lay out all cash up front. These loans are repaid in fixed installments out of the future cash flow generated by the equipment or machinery.
If you are selling to your customers on extended payment terms, lenders can use your accounts receivable as collateral and make cash advances to you immediately upon issuance of the invoices. This process speeds up your cash flow, so you can pay your suppliers sooner and possibly take advantage of any prompt payment discounts they may offer.
The Buckeye State has numerous commercial banks, government agencies, and nonprofit organizations that offer loans to small businesses.
Economic and Community Development Institute provides education, training, advice, and access to loan capital financing.
Huntington National Bank is a leading lender for SBA loans in Ohio and other states in the Midwest.
The Ohio Capital Access Program helps guarantee small business loans and, the Collateral Enhancement Program assists business owners in meeting collateral requirements.
Ohio Minority Business Direct Loan Program offers low-interest loans to minority-owned businesses for the purchases of fixed assets that will create more jobs.
Telhio Credit Union offers SBA loans from its 12 locations throughout the state of Ohio.
The Grow Now initiative offers qualifying small businesses up to a 3% reduction in interest rates for small business loans.
Loan Loss Reserve Program offers credit enhancement of up to 50% of a qualified energy efficiency project on an existing structure.
The Regional 166 Direct Loan Program promotes economic development, business expansion, and job creation by providing low interest loans.
The Rural Industrial Park Loan Program (RIPL) provides low-interest direct loans to assist eligible applicants in the industrial parks space.
State Small Business Credit Initiative (SSBCI) supports small businesses across the state.
Women’s Business Enterprise Loan Program is designed to stimulate the growth of women-owned businesses by providing loans at market rate.
Ohio Micro-Loan Program is designed to stimulate the growth of businesses by providing micro-loans at 0% interest.
Community Development Financial Institution Loan Participation Program is designed to provide subordinated debt to Ohio small businesses.
Early Stage Focus Fund will provide capital to investment funds to support early-stage technology companies in underserved groups.
Collateral Enhancement Program 2.0 (CEP) facilitates increased lending to small businesses, minority-owned businesses, and women-owned businesses.
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The Ohio Department of Development, together with the U.S. Small Business Administration, sponsors the Buckeye State’s Small Business Development Centers. These SBDCs help business owners with marketing strategy, strategic business planning, financial projections, and identifying sources for funding. The Ohio Economic Development Association is a member-based organization that provides advisory services and links to resources for small businesses.
SCORE links its retired executives with small business owners through their offices located in Dayton, Cincinnati, Columbus, and Cleveland.
Ohio has several grants available to small businesses. The Workplace Wellness Grant Program offers grants to employers to initiate programs to improve their employees’ health, and the Workplace Safety Innovation Center helps employers with grants to lessen the frequency and severity of workplace injuries.
Before applying for a loan in Ohio, you’ll need to decide on a business name and set up the structure. You may start as a sole proprietorship in the beginning and only need to register the name of your business with the local county clerk. When you incorporate later on as you grow and add employees, you’ll need to register your corporation or limited liability company with the Ohio Secretary of State.
A lender will be more receptive to your loan request if you present them with a logical plan. Your proposal should explain why you need the loan, what you’ll use the money for, how the lender will be secured, and the schedule on which you intend to pay the loan back. Loan requirements also typically include a minimum credit score and monthly revenue.
The type of loan that you look for depends on why you need the money. Let’s suppose you want to start up a machine shop to manufacture parts for the automobile industry, and you need to purchase a drill press, a metal lathe, a milling machine, and a welder. These are all long-term assets that should be financed with equipment loans that have payments over several years. To finance the working capital of your shop, you can use a short-term revolving line of credit to purchase the raw materials for inventory and support your receivables after you ship the finished products on credit terms to your customers.
Small businesses need more than just the owner’s equity to operate. They will occasionally need loans to pay for the purchases of fixed assets and support temporary increases in working capital. In addition to being proficient at the craft of their trade, small business owners need to sharpen their financial skills and develop working relationships with lenders who can step in to provide the funding to support a company’s growth.
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+.
An SBA 7(a) loan is a form of financing that is partially guaranteed by the SBA. These loans are named after article 7(a) of the Small Business Act of 1953, which launched the SBA and tasked the agency with supporting American small businesses through lending. You can learn more about the SBA 7(a) loan on our blog.
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