Small business loans Massachusetts

To apply for a business loan in Massachusetts, you can follow a few general steps. Start by researching potential lenders, including traditional banks, online lenders and government-backed programs. If you have a relationship with a local bank, find out what business loans they offer. Make a list or spreadsheet of lenders comparing the programs they offer, including rates, terms and qualifications. Swoop can help you find lenders that meet your business needs and whose qualifications you meet. 

Once you’ve identified suitable options, gather the necessary documentation, which typically includes business financial statements, tax returns and a detailed business plan. Contact the chosen lender to ask about their specific application requirements and procedures. Be prepared to provide information about your business’s financial history, purpose of the loan and how you plan to use the funds. 

You should also check your personal and business credit scores, as they can influence the loan approval and terms. Remember to carefully review the terms and conditions of the loan before submitting your application. Getting help from financial advisors or small business support organizations can give you valuable insights and assistance throughout the application process.

What alternative business financing options are there?

Loans aren’t the only way that a small business can fund their projects. Several alternative business financing options are available for small businesses. These options include:

1. Peer-to-peer lending (P2P): Access individual lenders directly through online platforms who may lend you money directly.
2. Crowdfunding: Raise funds by presenting your projects or business ideas to a large number of people through crowdfunding platforms who will contribute to your funding, usually in exchange for early access to the product or service.
3. Invoice financing: Sell unpaid invoices to a third party at a discount, providing immediate cash flow.
4. Venture capital: Get funding from venture capital firms in exchange for equity (usually for high-growth startups). 
5. Merchant cash advances: Get a lump sum of capital in exchange for a percentage of daily credit card sales.
6. Equipment financing: Access financing specifically for the purchase or lease of equipment, with the equipment serving as collateral.
7. Business lines of credit: Access a revolving line of credit up to a predetermined limit, paying interest only on the amount borrowed.
8. Revenue-based financing: Repay your financing as a percentage of your business’s revenue.

It’s essential for all businesses to carefully evaluate the terms, interest rates and repayment structures of these alternative financing options based on their specific needs and circumstances. 

What credit score do I need?

To get a small business loan in Massachusetts, lenders will consider your credit score to determine if you’re likely to pay back the loan (or creditworthy). Traditional lenders, such as banks, typically prefer higher credit scores, often in the range of 680 and above. For Small Business Administration (SBA) loans, while there isn’t a specific minimum credit score requirement, a score of 660 or higher is often considered favorable by lenders.

Alternative lenders, online platforms and microloan providers may be more flexible and consider lower credit scores, sometimes as low as 500. However, a lower credit score may result in higher interest rates or less favorable terms because the lender is taking more of a risk in lending to you.

Always check the specific requirements of the lender you’re considering and understand how your credit score may impact the terms of the loan. You may be able to improve your credit score over time and get a better rate by applying later. Additionally, lenders will consider other factors such as your business revenue, cash flow and overall financial health in the loan application process.

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

The typical interest rates on a business loan in Massachusetts can vary depending on several factors. Traditional lenders, such as banks, may offer lower rates, especially if the business has a good credit score. Interest rates for these loans may range from around 4% to 10% or more. Most small businesses will get an interest rate between 7-9% right now. 

For SBA loans, which are government-backed, the rates are often competitive and may fall within a similar range, depending on the specific SBA program. SBA loan interest rates are tied to the U.S. Prime Rate and the SBA sets a maximum interest rate, but lenders can decide what rates to offer within those ranges. Right now, average SBA loan interest rates are between 11.5-15%. 

Alternative lenders, online platforms or microlenders may have higher interest rates, potentially ranging from 10% to 30% or more. This is because of the high risk they undertake.

How long does it take to get funds?

The time it takes to get your 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. Traditional bank loans may take several weeks to a few months from application to approval, with an additional period for funds to be disbursed after approval. The application review and underwriting process are usually the longest part of the loan process.

SBA loans often have a longer processing time, ranging from several weeks to a few months, and the disbursement of funds can take additional weeks. This is why SBA loans are best for businesses that can wait a bit to use their funds.

Online and alternative lenders generally offer faster processing times, with approval within a few days to a few weeks. Once approved, funds may hit your account relatively quickly, sometimes within a few business days.

The actual processing time can also depend on how complete your application is and any additional documentation requested by the lender. Some lenders may offer expedited processing for certain types of loans, so always check the estimated timelines before applying.