Do you want to know how to get a small business loan in florida? Start by comparing loan offers of different lenders. Be ready with your financial documents.
What is behind every successful Florida business? Aside from the entrepreneur’s passion and the hardworking Floridians that make up the business, it is the access to business credit. Many Florida small business owners grow their enterprise with the help of small business funding solution, whether in the form of loans or venture capital, to provide financial assistance. This type of support is crucial in keeping the entrepreneurial spirit alive. Let’s face it; almost all businesses have had to contend with financial challenges, especially initially. Thankfully, there is no shortage of small business loan options from local lenders in the sunshine state. These financing options could lead you to golden opportunities your Florida business needs to hit the ground running.
This article will guide you on how you can get a loan for your Florida small business.
1. Determine why you need a small business loan
While it’s easy to assume that newbie entrepreneurs can always use financing solutions for their business growth, not all actually need or would want to secure a small business loan. Hence, it is important to ask yourself why you will apply for one. Do you require working capital? Are you short in funds to pay your business expenses? The beauty of loan programs is that most offer the flexibility of use while others are optimal for a specific purpose. In any case, make sure it is for your business, and at the same time, it will be able to fulfill your loan obligation given its potential for a higher income.
Learn about the different types of Florida small business loans
Working capital loans help Florida-based businesses overcome challenges in their cash flow, among other things. But such funding resources also come in various types that target a specific need of the borrower. Let’s discuss some of the most common ones.
Small Business Administration SBA loan
When applying for a business loan for the first time, we suggest that you consider trying it out for an SBA loan. Most Florida businesses qualify for this loan, whether you are a full-service restaurant operator or an insurance agency. The main difference between SBA loans and standard business loans is that the Small Business administration SBA guarantees them up to 85 percent of the unpaid outstanding balance when the borrower defaults. The SBA-approved lender, which SBA district offices in North and South Florida can help you find, also provides technical assistance to those applying for microloans.
SBA loans are available through accredited banks and lenders, not directly through the Small Business Administration of the federal government. These loans have different variants, such as the 7(a), 504, express, etc. They usually offer more competitive rates and longer repayment periods. Nonetheless, except for the SBA express loans, you need to consider that their processing time can take three months.
It is common for Florida small businesses to purchase equipment, upgrade or replace their current one, which is crucial for their enterprise. This equipment may be necessary to increase production or facilitate tasks that increase revenues. Equipment financing can help you acquire the equipment you need. It could be a dental chair or a commercial oven, which becomes your loan collateral. The lender can finance up to 80 percent of the purchase amount, so you need to put in the rest. You don’t have to worry about waiting long for the funds because this loan has a quicker turnaround time.
If your business needs outright cash to consolidate debt or cover day-to-day expenses, you can benefit from term loans. As their name suggests, these loans are paid in installments within a specified period, usually up to five years, and are multipurpose in nature. When you need small to moderate amounts, short-term loans whose processing can take several days might be right for you. Traditional financing from banks and financial institutions would have more stringent requirements than an alternative lender. However, the interest rate is the tradeoff, as it is higher for lenders who may require less documentation. Often, you have to present fixed assets as collateral for this transaction, which could be commercial real estate, personal property or vehicle, etc.
Have unpaid invoices been hampering your cash flow? Perhaps you can consider applying for invoice financing as a business loan in Florida. The way it works is that you can borrow a percentage of your outstanding invoice from a lender. Once your client has settled this invoice, you can repay your lender along with the interest and their fees. An offshoot of this transaction is invoice factoring, where the lender or the factoring company takes over your unpaid invoice and handles collecting the payment instead. Given that you are unloading yourself of the unpaid invoice, the lender usually would charge a higher interest under this loan type.
Revolving credit line
There would be Florida businesses who don’t need a huge lump sum; they only want quick access to funds as necessary. Hence, a business line of credit provides entrepreneurs with an approved pool of funds at their disposal. The borrower gets charged interest based only on the amount they draw from this pool. Typically, this type of business financing is unsecured, but for amounts more than 100,000 dollars, the lender will require collateral. Meanwhile, a business credit card also works similarly, the difference being the form of funds that you can access as you use it to purchase items or pay for transactions.
Merchant cash advance
One of the business loans in Florida that allows you to get your future sales right when you want it is merchant cash advance. It also offers flexibility in repayment because you get to pay it back based on a percentage of your actual credit card sales or a portion of funds in your bank account. It assists small businesses during a low sales season. Although its convenience comes at a higher interest rate, it also makes up for faster processing and accommodates lower credit scores.
3. Compare lenders of small business loans in Florida
The Florida Department of Economic Opportunity provides federal resources to Florida small businesses such as loans and other funding programs to flourish in their industry. But their facilities may not be sufficient for some borrowers who may need a higher amount, or their industry is not eligible for certain loans. Traditional financing like a bank or credit union would have at least one high financing loan program available for Florida small business owners. There are also other lenders such as a credit union, an online lender, even peer-to-peer lending that offer different types of business loans. These lenders vary in interest rates, terms, and requirements. Hence it is important to weigh the pros and cons of each potential lender before jumping the gun.
Let’s peek into some of the best lenders and loan options for Florida businesses.
Loan guarantees add extra confidence to the lender if the borrower cannot finish off their loans. Enterprise Florida results from a public-private partnership that promotes economic opportunity and development. Their Microfinance Guarantee Program is designed to assist small businesses with less than 25 employees by guaranteeing up to 50 percent of their loans, amounting to not more than 250,000 dollars.
If you need a substantial amount to fund your small business, you may consider a commercial mortgage loan from FirstBank. This bank, an SBA preferred lender, has multiple office locations in South Florida. Aside from SBA loans, they also offer business lines of credit, construction loans, and other commercial loans.
Florida Black Business Loan Program
This loan option is targeted at black business owners who have a minimum of 51 percent equity and are available only in two lenders: FAMU Federal Credit Union and Miami Bayside Foundation. FAMU accommodates eligible borrowers with Florida small businesses, while Miami Bayside Foundation caters specifically to those living in Miami Dade county. The borrower can normally loan up to 75,000 dollars, but it stretches to 150,000 for special cases.
SSBCI loan participation
State Small Business Credit Initiative, or SSBCI, was established by the government under the Small Business Jobs Act of 2010. It allocates funding to states that enhance small business credit availability to borrowers and extend loan participations to lenders. Their loans range between 250,000 dollars to 5 million dollars are multi-purpose; you can use them to cover startup costs, inventory purchases, franchise fees, except real estate purchases.
Community Contribution Tax Credit Program
While it is not exactly a loan option, Florida small businesses that make donations to this program can benefit by reducing taxation by up to 50 percent in sales tax refunds or tax credits. However, you should check first if the organization you will be donating to is listed among qualified recipients of the Florida Department of Economic Opportunity before claiming your tax credits or refunds.
Florida Credit Union
Florida Credit Union, an SBA lender, offers a Paycheck Protection Program geared to help small businesses ensure their employees are paid despite the recent repercussions of Covid 19. Qualified borrowers include those with no more than 500 employees and can loan 2.5 times their average monthly payroll expenses, or a maximum of 10 million dollars, whichever is lower. As long as the proceeds are used to pay employee salaries, rent, utilities, and mortgage interest, it is entitled to loan forgiveness.
Florida SBDC network
A Florida small business owner can also benefit from having working capital funds and mentoring. The truth is, not all entrepreneurs go into the industry fully knowing what to do and how to overcome the obstacles. This SBA resource partner has a large database of everything you need to learn about growing your business. It has in-house experts who will provide business training and consult with, especially when navigating the ins and outs of managing a business.
4. Check your qualifications for Florida small business loans
One of the main qualifications if you are going for a more substantial amount with a lower interest rate is strong credit. Banks usually require a minimum credit score of 680 for loan approval. In case you fall short of this score, there’s still hope given the other loan programs you can get in South Florida and other parts that cater to business growth. But you have to remember that these loan options provide small and moderate amounts and would come with a higher interest.
Business income and tenure
Most lenders would require Florida small businesses to operate a minimum of 1 year. However, if you are a startup company, you can look for lenders that can accommodate your needs but expect that they will likely grant you a smaller amount. Having a strong personal credit score, among other things, can otherwise raise your approved funds.
Meanwhile, you must be able to present the viability of your business by creating a solid business plan. This document helps your lender understand your business. It should include an executive summary, company description, market analysis, organizational chart, marketing strategies, and financial projections. Moreover, you should also explain the purpose of your loan request and your intended loan amount.
Once you have completed your documentation, you are ready to submit your loan application to your chosen lender.
Final thoughts on Small Business Loans Florida Entrepreneurs Should Consider
So do you know now which loan option to pursue? We hope that this article will help you take advantage of the loan offerings you can avail yourself of wherever your business is located in Florida. It is reassuring to know that the Florida state government is very supportive, given the many loan programs it has put in place that ultimately help your business succeed. We also suggest you consult a financial advisor if you can in case you need further information. Feel free to ask as many questions when talking with potential lenders to land the right loan for you.