Small business loans Ohio

While every loan application will be different, applying for a small business loan in Ohio involves several general steps.

1. Research: First, it’s important to research and select a lender that aligns with your business needs. Traditional banks, credit unions, online lenders and government programs like the Small Business Administration (SBA) are common options. Compare rates, terms, loan amounts, funding times and more to uncover the right option for your business. It’s also a good idea to research loan eligibility requirements and compare them to your business and personal qualifications such as annual revenue, time in business and credit score.
2. Gather documentation: Once you’ve identified a potential lender, gather the necessary documentation. This typically includes your business plan, financial statements, tax returns and other relevant information about your business’s financial health. 
3. Apply: Next, complete the loan application provided by the lender. Make sure that all required fields are accurately filled out, and provide any additional information or documentation requested.
4. Wait: The lender will then review your application, which may include a credit check and a detailed assessment of your business. Review and underwriting are often the longest parts in the loan process, but you can shorten the time by responding quickly to any requests for more information. 
5. Review: If approved, carefully review the terms and conditions of the loan, including interest rates, repayment schedule, and any associated fees. Seek clarification on any aspects that are not clear.
6. Spend the loan: Upon meeting all conditions, the funds will be disbursed. Use the funds according to the agreed purpose outlined in your loan application.

Communication with your chosen lender is key to a smooth loan application process. Many lenders will assign a loan officer or account manager who can answer your questions. You may choose to ask a financial advisor or business consultant, such as a business accountant, to help you understand the terms and conditions of your loan before you sign. 

What alternative business financing options are there?

Businesses have several alternative financing options beyond traditional bank loans. One option is peer-to-peer lending, where individuals or groups lend money to businesses through online platforms. There are also crowdfunding platforms that allow businesses to raise funds from a large number of individuals in exchange for products, services or equity. If you have a high-growth startup, you may consider angel investors and venture capital firms which provide funding in exchange for equity.

Invoice financing or factoring enables businesses to receive immediate cash by selling their customer’s unpaid invoices (accounts receivables) at a discount. For businesses that do a large volume of sales in credit cards, merchant cash advances provide a lump sum in exchange for a percentage of daily credit card sales. Additionally, equipment financing allows businesses to buy or lease equipment by obtaining a loan secured by the equipment itself as collateral.

Business lines of credit provide a business with funds up to a pre-set credit limit. Similar to a credit card, you can reuse the funds once you pay the balance and you only pay interest on what you spend. Business credit cards can also be used for everyday business expenses to help manage cash flow. 

It’s important for businesses to carefully assess their financial needs and consider the terms and conditions of each option before choosing the alternative financing method that fits their specific circumstances. 

What credit score do I need?

The required credit score for a small business loan varies depending on the lender and the type of loan you are seeking. Traditional lenders such as banks and SBA lenders often prefer higher credit scores, typically in the range of 680 or above. This indicates a lower credit risk for the lender. A higher credit score also gives you leverage to negotiate a lower interest rate on a loan. 

On the other hand, alternative lenders, including online platforms, may have more flexible credit score requirements and might consider scores as low as 550. However, they will probably also have higher interest rates on their loans to make up for the risk. 

While credit score is a significant factor, lenders also look at other aspects of your financial profile, including your business’s revenue, time in operation and overall financial health. A higher credit score can increase your chances of securing a loan with more favorable terms, such as lower interest rates. Different lenders may have different criteria, so researching and understanding the specific requirements of the lender you’re interested in is important. 

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

The typical interest rates on business loans in Ohio can vary based on several factors. Traditional lenders may offer lower interest rates, often ranging from around 5.75% to 12% on average, especially for businesses with strong creditworthiness and a stable financial history. SBA loans have limits on their interest rates, which are tied to the U.S. Prime rate and generally run between 11.5% to 16.5%.

Alternative lenders, including online platforms, may provide faster approval processes but often come with higher interest rates, sometimes ranging from 10% to 60% or more. The rates can be influenced by factors such as your credit score, business performance and the amount and type of loan.

It’s important for business owners in Ohio to carefully review and compare the terms and conditions offered by different lenders. Given the variability in interest rates, seeking quotes from multiple lenders and consulting with financial advisors can provide a more comprehensive understanding of the available options.

How long does it take to get funds?

The time it takes to receive funds for a small business loan can vary depending on several factors, such as the completeness of the application, the complexity of the loan and the lender’s internal processes. Traditional lenders often have a more extended and thorough application process, which may take several weeks to months. SBA loans also have more stringent review processes and can take up to six months to fund, depending on the type of the loan. 

On the other hand, alternative lenders may offer a quicker turnaround. Some online lenders can approve and disburse funds within a matter of days or even hours. The speed of the process is often attributed to streamlined application procedures and a focus on assessing business performance rather than relying on credit scores.

In addition to the application and approval processes, the time it takes to receive funds is influenced by how promptly the borrower can provide required documentation and meet any conditions set by the lender. This is why it’s so important to be communicative with your lender and respond to any requests in a timely manner.