Small business loans Kentucky

You can simplify your loan application process in Kentucky by following these steps:

1. Assess your business needs. Determine how much money you need for exactly what projects, whether it’s commercial real estate, working capital or business equipment.  Finally, use a loan calculator to determine how much of a loan you can afford based on interest rates and repayment terms. 
2. Determine your qualifications. Check your credit score, which is the first way a lender determines your creditworthiness, or how likely you are to pay back a loan. Also take stock of your ability to provide collateral or a down payment.
3. Make a list of loan programs. Set up a spreadsheet or other document and make a list of the traditional loans, SBA loans or alternative loans you think meet your business needs. Swoop can help you find available loans or other financing programs that suit your needs. Take note of qualifications, special conditions and fees. Compare the loans to find the best one for your business. 
4. Gather necessary documentation. Most lenders will ask for your tax returns, business financial statements and identification or licensing documents before they’ll approve your loan. Your business plan is another important document that can help you make a case for why you need a loan. 
5. Apply for your chosen business loan. You can often apply for a business loan online, although some financial institutions will ask you to bring in or mail hard copies of your application. It’s a good idea to have a business consultant or accountant review your application to make sure you’ve filled it out correctly. 
6. Review approval documents carefully. Before you sign for your loan, take a hard look at the terms, conditions and fees and ensure you understand them. Again, a business consultant, lawyer or accountant can answer any questions you may have.
7. Comply with terms and conditions. Make sure you spend the loan money in the way that your loan contract stipulates so you don’t default on your loan. You should also set up your repayment plan, which you can often automate to save you time.

What alternative business financing options are there?

If you don’t qualify for a loan or can’t afford to commit to one, there are many other financing options available in Kentucky. 

• Business lines of credit provide small businesses with a pre-set sending limit. You only pay interest on the money you spend and you can usually access the money again once you’ve repaid it. Many small businesses keep a credit line ready in case of emergencies.
• Merchant cash advances offer quick access to capital in exchange for a percentage of your future credit card sales. This can be a good idea for businesses that do a large volume of business in credit or debit cards, but the fees and interest rates can add up quickly.
• Invoice financing allows you to borrow money against any outstanding invoices that your vendors owe you. 
• Crowdfunding platforms can help you raise money from individuals around the world, usually in exchange for advanced products or special services. 
• Peer-to-peer lending connects you to individual investors who will pay for equity in your business. 
• Business credit cards allow you to make everyday business purchases so you can free up cash flow for expenses like rent or payroll. Some credit cards can help you build your credit score and many will offer perks like points or cash back as well. 

Each of these options will have different terms and conditions, and some may have high interest rates. Always make sure you understand the terms before you sign on for financing. 

What credit score do I need?

The ideal credit score for a small business loan in Kentucky will vary based on the type of loan you want, the amount of money you need and the lender you choose. Higher credit scores usually mean better interest rates and repayment terms.

• A score of 700 and above is considered good and usually qualifies you for traditional bank loans.
• A score of 680 or above will usually qualify you for a business credit card. 
• A score of 620-640 or above can often qualify you for an SBA loan.
• A score of 550-620 may be considered for an alternative or online loan. 

Any lender that considers a lower credit score will probably offer a higher interest rate or shorter repayment term to make up for the risk. If you don’t qualify for a loan based on your credit score, you can always work on the score and apply at a later time. Remember that lenders also use other factors like your business’s financial health, personal income, collateral and your business plan to determine your eligibility. 

What are the typical interest rates on a business loan in Kentucky?

According to the Federal Reserve, the average traditional business loan interest rate in 2023 fell between 5.89% and 12.23%. For SBA loans, which are tied to the U.S. Prime rate, most businesses received interest rates of 11.5 to 15%. Equipment financing rates had a much broader range of 4 to 45%. Online term loans ranged from 6-99%. 

Interest rates on business loans can vary depending on your creditworthiness, the loan program, the amount you’re borrowing and which lender you choose. This is why it’s so important to shop around and make sure to read the fine print before signing any loan offer. 

How long does it take to get funds?

For most traditional loans, you can expect it to take at least six weeks to get funds after you apply for the loan, pending approval. This is because underwriting and approval processes can take a lot of time for traditional banks and credit unions. SBA loans may take even longer – up to six months for you to receive funds – due to the approval process. If the bank or financial institution has to follow up with you on your application or request additional information, this can slow the process down as well. 

Most online loans offer quick, online applications and funding in as few as 48 hours from approval. However, they also tend to have steep interest rates and short repayment terms, which can make them very expensive in the long run. 

Always take application and processing times into consideration when you apply for a loan. If you can’t wait for the money, you may want to seek a different type of funding.