Small business loans Montana

Applying for a small business loan in Montana will be different depending on the type of loan you apply for and your lender, but there is a general series of steps you can expect to follow:

1. Determine the type of loan that aligns with your business needs. Ask yourself how much money you need to hit your goals as well as how much you can reasonably afford to repay. Also, determine how you’ll use the funds, whether it’s to buy new equipment, purchase commercial real estate or as working capital. 
2. Gather the necessary documentation, which may include financial statements, tax returns, business plans, and other relevant financial records. Also, check your credit score, as lenders often consider this factor when evaluating loan applications.
3. Research different lenders in Montana and nationally, including banks, credit unions, online lenders and alternative financing providers. Compare interest rates, terms and fees associated with each option.
4. Select a lender and complete the loan application provided and make sure that you provide all required information accurately. Submit the necessary documentation along with your application. Many lenders allow you to apply online, but some may ask you to come in with your documents in order to apply. 
5. Wait for the lender to review your application and supporting documents. The time frame for approval can vary depending on factors such as the type of loan, the complexity of the application and the lender’s internal processes. Be prepared to submit more information to justify your need for the loan. The more quickly you reply, the more quickly the application process can proceed.
6. If approved, carefully review the loan terms, including interest rates, repayment terms and any associated fees. Make sure you understand all aspects of the agreement before accepting the loan.

What alternative business financing options are there?

If you don’t qualify for a traditional loan or aren’t comfortable with the monthly payments you will have, there are several alternative financing options for small businesses beyond traditional bank loans. These alternatives serve various business needs and financial situations. Some common options include:

• Peer-to-peer (P2P) lending, which connects businesses directly with individual investors.
• Invoice financing, which allows businesses to receive funds upfront by selling their outstanding invoices to a financing company, improving cash flow. 
• Merchant cash advances provide a lump sum in exchange for a percentage of daily credit card sales, with repayments linked to sales volume.
• Crowdfunding platforms that enable businesses to raise funds from a large number of people, either through rewards-based crowdfunding or equity crowdfunding. 
• Equipment financing allows businesses to secure financing while using the purchased equipment as collateral.
• Angel investors invest personal funds in businesses in exchange for ownership equity, often providing mentorship and expertise.
• Venture capitalists are professional groups that invest large sums in high-growth startups in exchange for equity.
• Business lines of credit provide businesses with access to funding up to a pre-set limit, similar to a business credit card. 

It’s important for businesses to carefully evaluate each option, considering factors such as interest rates, terms and eligibility requirements. Choosing the right alternative financing option depends on the unique needs and circumstances of the business. 

What credit score do I need?

The credit score required for a small business loan varies depending on the lender and the type of loan. A higher credit score is an indicator that the borrower is less risky to lend to, which means higher chances of approval as well as lower interest rates and more favorable terms. While a higher credit score increases the chances of securing favorable terms, other factors, such as business revenue, time in operation, and financial health, also influence loan approval and terms.

Traditional lenders, such as banks, typically prefer higher credit scores, often in the range of 700 and above. Alternative lenders and online platforms may be more flexible, considering credit scores in the fair to good range, generally starting around 580, but they will usually offer higher interest rates to make up for the risk. 

Always check the specific requirements of the lender or loan program you are considering and take steps to improve your credit score if you need to before applying for a small business loan.

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

The typical interest rates on a business loan in Montana can vary depending on several factors. Interest rates for bank loans may range from around 5.75-12% or more, depending on factors like creditworthiness, the purpose of the loan, and the length of the repayment term.

Online lenders and alternative financing options may provide faster access to funds but can come with higher interest rates, often ranging from 10% to 30% or more. These rates can be influenced by the risk associated with lending to the business.

For SBA loans, which are partially guaranteed by the federal government, interest rates are generally more favorable. SBA loan rates will vary based on the program and lender, but they are tied to the U.S. Prime rate and the SBA places limits on how much interest a participating lender can charge. Currently SBA loan interest rates fall between 11.5-16.5%. 

It’s important for businesses in Montana to compare offers from different lenders, considering not only the interest rates but also other terms and fees associated with the loan. Consulting with financial advisors in Montana can provide further guidance in navigating the options available and securing the most favorable terms for a business loan.

How long does it take to get funds?

The time it takes to receive funds from a small business loan can vary. 

Ultimately, the time it takes to receive funds depends on the specific circumstances of the loan application and the policies of the chosen lender.

In general traditional lenders, like banks, often have a more extended application and approval process, which may take several weeks to a few months. 

SBA loans, while offering favorable terms, can have a more extended approval timeline due to additional government regulations and reviews. You can expect an SBA loan to take at least a few weeks but as long as six months to fund after you apply. Smaller loan amounts – especially microloans – may be processed more quickly than larger, more complex loans.

On the other hand, online lenders and alternative financing options may offer a quicker turnaround, with some providing funding in a matter of days or weeks. These lenders tend to have quick online applications that don’t require as much review – but be aware that the quicker funding usually comes with higher interest rates, making the loan more expensive in the long-run.

Business owners can speed up the loan application and funding process by making sure they submit a complete and accurate application, responding promptly to any requests for additional information and maintaining clear communication with the lender throughout the process.