Figuring out how to get a small business loan in New York is not as complicated as you think.

Set an appointment with a potential lender to determine how to get a small business loan in New York. Ask about requirements and assess your qualifications.

If you make it in the Big Apple, you can make it anywhere. Perhaps it is because one of the biggest economies in the US is New York, bringing in nearly 2 trillion dollars in gross state product in 2021.

According to the Small Business Administration, 99 percent of businesses in the state, or over 2 million businesses, are small businesses. Over 200,000 across the five boroughs employ more than half of New York city’s total workforce.

But in this very large scale of economic activity, you might wonder, what would qualify as a small business? For the state of New York, it is a company with a maximum of 100 employees. At the same time, the Small Business Administration considers those with a workforce of 500 or less under the small business category. It is important to note this criterion because you may or may not have access to small business funding based on how a particular lender will categorize your business.

Small businesses in New York

While operating a New York small business may seem like a good position, it is not without challenges. You have the high rent, strict regulations, a dizzying number of fines and taxes, and rising employee wages. Hence, small business owners will have to resort to business financing tools at some point, which usually comes in the early stages, to deal with such hurdles.

The state shows its support with the availability of small business loan options and federal programs to help New York businesses succeed. Securing a small business loan in NYC can supplement your working capital to pay bills, cover business expenses, purchase equipment, carry out leasehold improvements, or invest in advancement tools. These things are possible without employing cost-cutting measures that may impact your small business services.

Look for small business funding near you

So you want to know how small business owners can get loans in New York. Let’s begin with discovering what funding options are out there. There are several small business loan types available to you like the following.

Term loans

When you need straight-up funds, you can get them from term loans offered by traditional banks and alternative lenders. They are released in a lump sum and repaid with interest in monthly installments within a specified period. Lenders will require collateral for more substantial amounts.

Small Business Administration SBA loans

SBA loans come in different variants, such as term loans, available in accredited banks and lending organizations. The beauty of their loans is that SBA itself guarantees up to 85 percent of the unpaid loan balance if the borrower defaults. Most of these loan offerings will entail a longer processing time and submission of business documents and financial statements. However, their small business loans usually offer the most competitive rates.

Lines of credit

A business line of credit is a pool of set funds on standby that small business owners can draw at any time. Interest charges are based on the drawn amount, with a minimum payment due. Like a credit card, you replenish this pool depending on your repayments; hence, it has no specific loan term. However, you have to be conscious of how long it takes you to repay as it charges a higher interest.

Equipment loans

While other loan types may be used for various purposes, equipment financing is obvious; it is targeted for equipment purchases. This equipment, either heavy-duty machinery or industrial apparatus, automatically becomes the collateral for the transaction. The lender may cover up to 100 percent of the purchase price, while others would require a downpayment between 15% and 20%.

Invoice financing

An NYC business can loan against their outstanding invoices through invoice financing. It is where the lender will essentially provide you the total invoice amount and expects to be repaid once your customer settles the invoice. You can get approval in 24 hours but come at a higher interest rate. As such, this loan is ideal for the short term only.

On the other hand, invoice factoring works similarly, but this time, the lender or the factoring company takes over the payment collection. Since they are now responsible for this task, they would also charge you higher interest than invoice financing.

Merchant cash advance

This small business funding works by advancing your future sales and repaying them using a percentage on your credit card sales transactions or deposits to your business bank account. Although it can be useful during those lean months, it is not a practical solution given its notoriously high interest. It uses a factor rate when computing the interest charge. Hence, you might only want to resort to this loan if you need quick cash that you intend to pay off in a short period.

Best small business loans in New York

Now that you are familiar with the types of small business loans, we’ll provide you with some of the specific small business loan options you can avail in NYC.

Brooklyn Fund

This small business loan program targets businesses based in Brooklyn, administered by the New York Business Development Corporation. It offers interest rates ranging from 6 to 8 percent and funds up to 350,000 dollars, with a maximum term of 10 years. You can submit your application to the Brooklyn Chamber of Commerce to avail this program.

SBA microloan

Most SBA loans can take up to 3 months to process. However, not all businesses can afford to wait that long, especially if they need funds immediately. If you just need that quick working capital boost of not more than 50,000 dollars, the SB microloan might be your answer. Processing time is within two business days, which you can apply at most New York banks and approved SBA lenders.

NYC Capital Access Loan Guaranty Program

NYC Economic Development Corporation came out with this program to provide up to 40 percent guarantee on loans with their six partner lenders. This option is great for new businesses that need a little more funding but not over 250,000 dollars and falls short in some traditional start-up business loans requirements.

BCNA loans

Business Center for New Americans or BCNA provides financing to small businesses located in Staten Island and Queens. As their name suggests, they also accommodate loan applications from immigrants, refugees, startups provided they have a guarantor when the loan amount is above 3,000 dollars.

Online lenders

Often, commercial banks and federal loan programs that have all these perks require strict documentation, which not all businesses may be able to fulfill. Online lenders are all about less-fuss and fast loans, albeit offer them at a higher interest. You can apply for invoice financing with Fundbox and get processed on the same day. Kabbage offers a business line of credit in three repayment periods: 6, 12, and 18 months and monthly charges fees in place of standard interest rates.

Special loan programs and business products

WE NYC supports women business owners in cooperation with the NYC Department of Small Business Services. They facilitate the process to encourage women by providing business resources, connecting them to local lenders that will be more accommodating to finance their loans.

Check if you qualify

New York lenders will require business documents and proof of income to essentially determine if they can trust that you can repay the money they will lend you.

Do you have good credit?

One of the things a financial institution wants to know is how you can manage credit, which a credit score reflects. A score of 670 and above is considered good and can get you approved for many business loans. Try checking your credit score once in a while, even if you are not applying for a loan. But if you are, you can secure your free credit report from any credit bureaus like Experian, TransUnion, Equifax, and other financial websites.

How long is your business operating?

You should target lenders that provide start-up business loans if you have a new business. Otherwise, you might not meet lender requirements which often include the age of your business. Commercial banks would go for businesses that are at least two years old, while alternative lenders accept applications from businesses operating for a minimum of one year.

How much is your business making?

For existing businesses, creditors would look for the profitability of your company. But some of you might find it a bit ironic considering you are getting a loan because you don’t have enough funds. Hence it is crucial to use your loan proceeds on things that help increase your income. In other words, if you are aiming for a bigger loan amount, you should be able to substantiate your application by showing that you will have enough revenues to cover your payments. For those with minimal annual income, you can still pursue other funding options such as short-term loans or equipment financing, depending on your purpose.

Do you have collateral?

Most business loans in New York city require security in the form of collateral. It gives more confidence and assurance to the lender and compensates for the shortcomings of the borrower, such as having a low credit score. Lenders minimize the risk with the contention that the borrower will exhaust efforts to fulfill their loan since a lot is at stake. Collateral assets have a value that can dictate how much loan will be granted. They are often real estate properties, either personal or commercial, equipment, inventory, bank deposits, or a blanket lien, allowing the lender to seize anything on your business if you cannot pay your loan anymore.

Talk to potential lenders in New York

When applying for the right small business loan, you should set aside some time to shop for lending options. Among the types of lenders, small business owners would want to get bank loans since they offer some of the lowest interest rates. It is your best option if you hit all the standard loan requirements. But if you fall short in your qualifications, online lenders or alternative lenders would be the next best thing. They have less stringent guidelines but charge higher interest in exchange. Microlenders are another option and perhaps will be the most lenient among the creditors. However, they have smaller loanable amounts, among other limitations.

Most lenders will be very accommodating and willing to give you financial advice. Ask all the pertinent questions since they help create informed decisions. Aside from their requirements, extract as much information as you can about interest rates, terms, processing time, and sample computation. With the estimated monthly amortization, you can determine if this is doable on your end; you don’t want your loan repayment to cripple your finances instead of assisting your cash flow or boosting your business.

After weighing all the offers discussed to you by the different lenders, you must choose only one that will provide your target loan option. You don’t want to submit one application after another within a short period because it will negatively impact your credit score.

Once you have decided which lender you can work best with, organize all the documents you need to submit, including a detailed business plan. The New York Small Business Development Center can provide technical assistance and additional resources to help you create one for free.

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