Did you know Indiana ranks as the No. 1 best state to start a business? It’s because more businesses thrive in the Hoosier State. The state boasts a low tax rate and many funding opportunities for business owners.
Read on to discover small business loan options for your Indiana-based business.
5-Step Small Business Loan Process
When applying for a business loan, you want to present yourself as a trustworthy borrower to lenders. Follow these steps to get the funding you need, whether you’re applying for a loan in South Bend, Bloomington, or anywhere in between.
1. Prepare for the Loan Application
During the process of taking out a loan, do your research and learn the basics. First off, know how much you need to borrow. Are you funding a renovation project or buying equipment or inventory?
If you borrow too much, you might have difficulty paying it off. Plus, you’ll pay more in interest rates and fees. However, if you borrow too little, you might not have enough to go through with your own business plans.
Next, look at your cash flow to see if you can repay your loans. For example, if you’re borrowing funds to open a new location, calculate if the revenue from this project can cover your loan payments.
In addition, lenders have eligibility criteria you need to meet, including your credit score, how long your business has been operational, and your company’s annual revenue. The requirements depend on the lender.
For instance, most financial institutions like banks and credit unions, typically only approve loans for borrowers with more than two years in business, while online lenders ask for a minimum of six months.
2. Have the Right Documents
Before giving you any cash, lenders want proof that you’re a real person and your business exists. So, make sure you have the following documents handy:
Legal identification documents. You may use your passport, driver’s license, employer identification number (EIN), and Social Security number (SSN).
Business formation paperwork. This includes business licenses, Articles of Organization, or Articles of Incorporation.
Personal income tax returns. You may need at least the last two years of your personal tax returns.
Business income tax returns. Prepare at least the last two years of your business tax returns.
Business financial statements. Lenders may ask for balance sheets, cash flow statements, and profit & loss (P&L) statements.
Business plan. Some lenders may ask you to submit a business plan that includes how you’ll use the loan amount and how you plan to pay it back.
3. Choose the Right Lender
Many entrepreneurs first go to their local bank for a business loan. But it may only sometimes pan out, especially for new businesses and startups, because banks have more strict requirements.
Start with the loan amount and what you need the loan for to find the right lender. Next, research loan providers, including online lenders. Then, make a list of lenders you want to work with and check their website and BBB rating. Make sure to read reviews and feedback to see how they deal with customers.
4. Negotiate Loan Terms
To compare loans and lenders, consider any interest, repayment period, and fees and penalties. Research market rates for small business loans in Indiana, so you have a starting point when negotiating.
Fortunately, you can skip the hassle of researching loans and lenders and get your funding quickly with Clarify Capital. Apply online or call us and talk to a Clarify adviser.
We’ll help you choose the best loan and lender depending on your business needs and the requirements you can meet. Plus, we have a marketplace of over 75 lenders, so you get the best rates.
5. Submit Your Loan Application
Clarify has streamlined the application process to make it easier and quicker to get your funding. Fill out the online application form or call us directly. Submit your documents, and you may get approved the same day. Once approved, you can receive funding in your bank account in as little as 24 hours.
Types of Loans for Indiana Small Businesses
Whether you’re looking to borrow capital to buy inventory for a quick sale, cover operating costs during a seasonal downturn, or handle emergency expenses, Clarify Capital offers small business loan options for your financing needs.
Working Capital Loan
Working capital loans are a business financing option that you can use for daily operating expenses, such as inventory, rent, utilities, and payroll. These loans typically have short repayment terms.
Working capital loans are available in business lines of credit, short-term loans, invoice factoring, and SBA loans.
U.S. Small Business Administration (SBA) Loan
SBA loans generally have the lowest rates and best payment terms because the U.S. Small Business Administration guarantees them. If a borrower fails to pay a loan, the government pays the lender up to 85% of the unpaid balance.
Aside from loans, the SBA facilitates community development and small business grants to entrepreneurs who experience other barriers to getting the needed funding.
The agency oversees different loan programs, including Microloans, SBA 504 loans, and 7(a) loans. Each loan has flexible eligibility requirements to help entrepreneurs who can’t get funding from traditional lenders. However, the drawback of SBA loans is the lengthy application process.
Business Line of Credit
A business line of credit gives you an account from which you can withdraw money on an as-needed basis. It works similarly to a credit card, where you only pay interest for the amount you borrow.
With this type of financing, you’re not taking on debt if you don’t need it. However, you have access to capital to stay ahead of unexpected expenses or take advantage of profitable opportunities.
Short-Term Loan
With a short-term loan, you receive the loan amount in a lump sum. Then, you’ll repay the loan with interest over fixed monthly payments within a set repayment schedule.
As the name suggests, term lengths range between six months and two years. In contrast, long-term loans have repayment terms of up to 25 years.
Invoice Factoring
Invoice factoring is a type of financing where business owners sell their accounts receivable to factoring companies. You receive cash upfront and turn over your receivables to the factoring company.
Then, when the invoices come due, the lender collects on your behalf, takes their fee, and pays you the remaining amount.
FAQs About Indiana Small Business Loans
Below are frequently asked questions to give you an idea about small business loans in the state of Indiana.
What Kind of Loan Can I Get for My Small Business in Indiana?
Fortunately, there are many financing options available to business owners in Indiana. You’re sure to find one that suits your business situation and needs.
For instance, if you need to stock up on inventory because you anticipate an increase in demand, you can apply for a short-term loan, business line of credit, or working capital loan. Many loans are unsecured, so you don’t have to provide collateral.
At Clarify, you can get approved for loans with a minimum credit score of 550. We also recommend that your business be operational for over six months with at least $10,000 in monthly revenue.
What Is the Easiest SBA Loan to Get Approved for?
The Microloans program might be the easiest to qualify for out of all SBA loans. It’s best for business owners who can’t qualify with traditional lenders. It’s also best for those looking to borrow loan amounts of up to $50,000. The loans are available through SBA-approved nonprofits.
Most microloans have a repayment term of six years. You can use the funds to buy supplies and inventory and pay operating expenses. However, you can’t use it to pay existing debts or purchase real estate.
The Indy Chamber is another good starting place for smaller loan amounts in Central Indiana. The nonprofit organization serves the Indianapolis community with business resources and loans.
Can I Apply for a Small Business Loan If I Have a Bad Credit History?
Even if you have a less-than-favorable credit history, you can still get approved for small business loans. At Clarify, we strive to help all business owners get funding, whether they have excellent or poor credit. Call us and speak to a Clarify adviser to explore your financing options.
Get the Funding Your Indiana Small Business Needs With Clarify Capital
The state of Indiana offers robust funding opportunities for small business owners. Take advantage and get the funding you need with Clarify Capital. We’ll help you get the best loan products for your Indiana small business. Apply online or give us a call.