Small business loans Mississippi

The process of applying for a business loan in Mississippi will change depending on which lender you apply with, how big of a loan you’re asking for and what type of loan you want. But preparation is key for a smooth, quick application process, so here are some general steps you can follow when applying for a business loan. 

1. Research lenders – Start by identifying potential lenders, including local and national traditional banks, credit unions, online lenders and government-backed programs. Look into their specific loan offerings, terms and eligibility criteria to determine the best option for your business. Swoop can help you narrow down which lenders offer the best programs for your situation.
2. Assess your needs and qualifications – Beyond knowing which loans are available, you need to understand your business’s qualifications, know how much money you need to meet your goals and be able to justify why you need the money to a lender. Your credit score is the top way lenders determine your creditworthiness, but they’ll also take a look at your business plan to decide if you’re likely to pay back the loan. Use a loan calculator to see how much a loan will cost you with fees and interest so you can decide if you can afford it.
3. Gather the necessary documentation – Most lenders will ask for your business and personal financial statements, tax returns, a detailed business plan and information about your personal and business credit history at a minimum. Be prepared to articulate how the funds will be utilized and to demonstrate your business’s ability to repay the loan.
4. Complete the loan application and submit – Make sure you fill the form out accurately, providing all required information. Different lenders may have varying application processes, so it’s important to follow their guidelines closely. You may be able to apply online and submit documents digitally, or you might have to go into a bank and have paper copies of your documentation. A loan officer, business consultant or business accountant can help you go over the application to make sure it’s complete before you submit it.
5. Be responsive and patient – Maintain open communication with the lender throughout the application process. Respond quickly to any requests for additional information and be prepared for a potential negotiation on terms and conditions. Because the underwriting and review process is often the longest part of a loan application, responding quickly can help you get your funds faster. 
6. Review any offers carefully – When your loan is approved, carefully review the loan agreement before accepting the terms. Seek legal or financial advice if needed to ensure a clear understanding of all terms and conditions.

Many banks and credit unions will assign you a loan officer or account representative to walk you through the loan process and make sure you understand the application. While they can be a helpful resource, it’s a good idea to make sure you carefully read and review any documents yourself to ensure you know the rates, terms and conditions of the loan before you sign. 

What alternative business financing options are there?

If you don’t qualify for a loan or can’t afford the interest right now, there are many alternative financing options are available for small businesses beyond loans. These alternatives serve different needs and financial situations:

1. Business lines of credit: A financial institution issues your business access to funds up to a pre-set spending limit, which you can usually spend again after you repay it, and you only pay interest on the money you spend. 
2. Invoice financing: A third-party financial institution buys unpaid customer invoices from your business and recoups the costs as the invoices are paid. 
3. Equipment financing: Get financing to buy or lease equipment, such as farm equipment, vehicles or kitchen equipment, using the equipment as collateral. 
4. Merchant cash advances: A financial institution lends your business a lump sum in exchange for a percentage of daily credit card sales in the future.
5. Crowdfunding: Raise funds from a large number of individuals through an online platform, usually in exchange for special products or early access. 
6. Venture capital and angel Investors: Businesses with high growth potential may seek funding from venture capitalists or individual angel investors who will provide capital in exchange for part ownership (equity) of the business. 
7. Microloans: Small loans, often provided by community-based organizations, can help businesses with small funding needs.

It’s important for business owners to carefully consider the terms, interest rates and repayment structures associated with these alternative funding options to choose the one that aligns best with their financial needs and goals. 

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. Generally, traditional lenders, such as banks, prefer higher credit scores, typically above 700, to show that you’re likely to repay the loan. A higher credit score will also usually get you better terms and lower interest rates on any loan. 

However, alternative lenders or online platforms might be more flexible and consider lower credit scores, sometimes in the range of 500 to 650. While they’ll be more willing to lend to those with lower credit scores, these lenders also tend to have higher interest rates (sometimes as high as 99%) to make up for the risk they take.

The credit score you need to secure an SBA loan can vary based on the SBA-approved lender who administers the loan, what kind of loan program you apply to and how much money you’re seeking. You may be able to qualify for an SBA loan with a credit score between 650-680, but you have a better chance of securing an SBA loan with a higher credit score because the programs are generally very competitive.

It’s important to note that while your credit score is a significant factor in determining your creditworthiness, lenders also assess other aspects of your business’s financial health, such as revenue, cash flow and overall history. 

Check with your lender about their credit requirements before you apply for a loan. If your credit score is lower than their requirements, you can try to apply using additional documentation to strengthen your application, or you can use other financing sources and wait to apply until you’ve improved your credit score. 

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

Interest rates on business loans in Mississippi can vary based on several factors. These factors include the type of loan, the lender’s policies, your creditworthiness and economic conditions.

For traditional bank loans, interest rates may be relatively lower, especially for businesses with strong credit histories. Currently, the average traditional loan will have an interest rate that falls between 5.75-12%. 

SBA loan interest rates are tied to the U.S. Prime rate, currently at 8.5%. The administering financial institution will add their percentage points to that Prime rate up to a limit set by the SBA depending on your application. Average SBA loan interest rates currently range between 11.5-16.5%. 

Online lenders and alternative financing options have a broader range of interest rates, currently falling between 7-60%. Again, online lenders tend to be open to lending to borrowers who are considered less qualified than others, but they will often have interest rates that are much higher to make up for their risk.

It’s important for business owners in Mississippi to shop around and obtain quotes from different lenders to understand the range of interest rates available. Additionally, consulting with financial advisors or loan experts can provide insights into securing a loan with favorable terms based on the specific needs and financial situation of the business.

How long does it take to get funds?

The time it takes to receive funds for a small business loan will vary depending on several factors, including the type of loan, the lender’s review and underwriting processes and how complete the application was.

For traditional bank loans, the approval and funding process may take several weeks to a few months, as banks typically have thorough underwriting procedures. Online lenders and alternative financing options often offer faster approval times, ranging from a few days to a couple of weeks. SBA loans tend to move more slowly because of the thorough review processes for securing a federally-backed loan, and you can expect to receive your funds in several months. 

The speed of funding can also depend on the complexity of the loan, the amount requested and your creditworthiness. Applicants need to provide all required documentation promptly and communicate effectively with the lender to speed up the process.