Small business loans Maryland

While every lender will have specific application procedures, when applying for a small business loan in Maryland you can expect to follow a few key steps:

1. Assess your business – Take a good look at your financial statements, credit score and ability to provide collateral to see what you may qualify for. Determine how much money you need and what you intend to use it for to help you figure out which loan programs are appropriate for you. You should also determine how much you can reasonably expect to be able to repay. You may use a loan calculator to help you see how much a loan will cost over time. 
2. Research lenders – Research local and national banks, credit unions and online lenders to find the best fit for your needs. Each may have different requirements and types of loans, so it’s a good idea to explore all your options. Swoop can help you narrow down your choices based on your qualifications and business needs.
3. Gather the necessary documentation – While each business loan application may have specific documentation requirements, you can expect for a lender to ask for several years of tax returns, financial statements, business plan, business incorporation documents or licenses and identification. It’s a good idea to have printed copies and digital copies of each so that you can easily send them to the lender when necessary. 
4. Reach out to the lender and apply – Communication is key when applying for a business loan. Many lenders will provide account managers to help guide you through the application process. Ask questions to clarify any issues and respond quickly if the lender asks you for more information. Be prepared to explain how you’ll use the loan funds and how it will benefit your business. 
5. Be patient – Underwriting and approval processes can take time, especially for traditional or SBA loans. It’s not uncommon for lenders to ask for more information. 

What alternative business financing options are there?

If you don’t qualify for a loan or aren’t ready for monthly payments, there are several alternative business financing options available for small businesses. Here are some common alternative financing options:

1. Peer-to-peer lending (P2P): Online platforms connect borrowers directly with individual lenders, allowing businesses to secure loans outside of traditional financial institutions.
2. Crowdfunding: Businesses can raise capital by presenting their projects or business ideas to a large number of people through crowdfunding platforms, usually in exchange for early access to products or services.
3. Invoice financing: This option involves selling unpaid invoices to a third party at a discount to access immediate cash flow. This can be a good option if you have long repayment terms with some of your vendors or clients. 
4. Angel investors: High-net-worth individuals invest their personal funds into early-stage businesses in exchange for equity ownership.
5. Venture capital: Venture capital firms provide funding in exchange for equity. This is often more suitable for businesses with high growth potential.
6. Merchant cash advances (MCAs): A lump sum of capital is provided to a business in exchange for a percentage of daily credit card sales, making it a form of short-term financing. While the interest rates and fees can get steep quickly on MCAs, they can provide quick money for small businesses that do a large amount of sales through credit or debit cards.
7. Equipment financing: This option allows businesses to purchase or lease equipment with the equipment itself serving as collateral for the loan. Many equipment financing companies specialize in the equipment they sell or lease, such as trucks, farming equipment or kitchen equipment.
8. Business lines of credit: Similar to a credit card, businesses can access a revolving line of credit up to a predetermined limit, only paying interest on the amount borrowed.
9. Revenue-based financing: Financing is repaid as a percentage of the business’s monthly revenue, making it a flexible option tied to the company’s performance.

Always make sure you read the fine print on any financing you’re offered so you understand interest rates, repayment terms and any fees. 

What credit score do I need?

The credit score required for a small business loan can vary depending on the lender and the type of loan you’re seeking as well as how much money you want to borrow. Generally, traditional lenders, such as banks, may look for higher credit scores, typically in the range of 680 and above.

For SBA loans, which are government-backed loans, a minimum credit score requirement is not explicitly set. This is because the loans are managed by SBA-approved lenders who may set their own qualifications to a certain extent. Most lenders prefer applicants with a credit score of 660 or higher.

Alternative lenders, online lenders or microlenders might be more flexible and consider lower credit scores, sometimes as low as 500. Keep in mind that a lower credit score may result in higher interest rates or less favorable terms because the lender is taking on more risk to lend to you.

It’s important to check the specific requirements of the lender you’re considering, as well as the type of small business loan you’re applying for. Lenders may also consider other factors such as your business revenue, cash flow and overall financial health when evaluating your loan application. Your business plan can also help you stand out to lenders as a qualified applicant.

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

The interest rates on business loans in Maryland can vary based on several factors, including the type of loan, the lender, your creditworthiness and overall economic conditions. Currently, small business loan interest rates can range from around 7% to 30%. 

Traditional lenders like banks may offer lower rates, usually in the 7-9% range on average, especially if the business has a strong credit profile. SBA loan rates are tied to the U.S. Prime Rate, and they currently range from about 11.5% to 15%, depending on the loan program. 

Online lenders and alternative financing options will often have slightly higher rates but may be more accessible for businesses with lower credit scores. If you have a very good credit score, you may be able to get an alternative loan for as low as 3.49%, although they can go as high as 60%. 

It’s crucial to compare offers from different lenders to find the most favorable terms for your specific situation. Additionally, consider factors beyond interest rates, such as fees, repayment terms and the overall cost of the loan to make an informed decision.

How long does it take to get funds?

The time it takes to receive funds for a small business loan can vary based on several factors, including the type of loan, the lender and the complexity of the application process. Underwriting and review tend to take the most time, which is why you might consider something other than a business loan if you need funds fast.

For traditional bank loans the approval process can take several weeks to a few months and for SBA loans the time it takes to process the application can be even longer. With both loan types, you’ll receive the funds within a few weeks after approval. 

Online and alternative lenders often have a faster application and approval process, making it possible to receive funds within a few days to a few weeks. Invoice financing and merchant cash advances offer even faster access to funds, ranging from a few days to a week. But, again, you may pay in the long run with higher interest rates or fees.

It’s important to note that these are general timelines, and actual processing times can vary based on the specific lender, the completeness of your application and any additional documentation required.