SHARE:
Fund It
Venture Capital • Loans • Crowdfunding • Grants
Commercial Loans
Borrow the Money You Need
Debt financing consists of borrowed dollars that must be repaid with interest, but generally does not give the lender any ownership control.
Whether from private or public sources, commercial loan approval is typically based on the business owner’s capacity to repay the loan as indicated by his or her past business experience, personal credit rating, collateral, industry conditions and the profitability of the business itself. You’ll have a better chance of making a good impression on a loan officer if you can present a fully developed business plan that shows you’re serious about business ownership and you’ve done your homework before taking the plunge.
Banks and credit unions are often cautious about making loans to business startups due to the high rate of failure associated with new businesses; you may have better luck securing funds from these sources once your business is established. Types of funding available from banks and credit unions include accounts receivable financing, inventory financing, unsecured lines of credit and commercial loans to satisfy special business needs. Some banks also may provide medium- and long-term loans to small businesses to increase working capital, purchase or lease equipment or finance real estate.
Commercial Finance Companies are often willing to take higher risks than banks; they typically charge higher interest rates on their loans as a result. These firms customarily evaluate loan applications more on the strength of collateral than on a company’s track record or potential for profit.
The U.S. Small Business Administration (SBA) offers no direct loans, other than for disaster assistance. Financial assistance to small firms from the SBA comes in the form of loans that are made by commercial banks or credit unions; in return, these institutions receive a federal-government guarantee for part of the loan. Applications for SBA loans are treated like any other commercial loan application: the primary deciding factor is an applicant’s ability to repay the loan. While good character, proven management ability, collateral and significant owner equity in a business are all important considerations, they carry less weight than demonstrated ability to pay the money back.
7(A) Loan
For businesses involved in exporting to foreign countries or operating in small communities and rural areas, and for other very specific purposes.
CDC/504 Loan
Long-term, fixed-rate financing to acquire fixed assets for expansion or modernization by for-profit businesses with a tangible net worth of less than $15 million and an average net income of $5 million or less after federal income taxes for the preceding two years. The money may be used for land, buildings, machinery and equipment.
Microloan
The SBA makes funds available to specially designated intermediary lenders, which, in turn, make small, short-term loans to eligible borrowers. The maximum loan amount is $50,000; however, the average microloan is about $13,000. Microloans may be used for working capital and to purchase inventory, supplies, furniture, fixtures and machinery or equipment. Proceeds from a microloan may not be used to pay existing debts or to purchase real estate.
Florida Microfinance Programs
Entrepreneurs and small businesses in Florida with no more than 25 employees and gross annual revenues of up to $1.5 million have access to credit through two microfinance programs administered at the state level.
Microfinance Loan Program
Short-term loans of up to $50,000 are available through administrators selected by the Florida Department of Economic Opportunity; if selected to receive a loan, the borrower must participate in business training and technical assistance provided by the Florida Small Business Development Center Network.
Microfinance Guarantee Program
Enterprise Florida Inc. uses state funds to guarantee loans of between $50,000 and $250,000 made by private lenders to entrepreneurs and small businesses in Florida; guarantees cannot exceed 50% of the total loan amount.
For additional information and to apply for either of these programs, visit www.floridajobs.org/microfinanceprograms.
Find out if you’re a good candidate for a commercial loan by rating yourself and your business against the 11 questions on our self-assessment checklist at FloridaSmallBusiness.com/TryIt.
- Free Downloads
Business Beat - Week of May 3rd
