More than half a million small businesses call Missouri home, and they in turn employ some 1.2 million Missouri residents according to the SBA Office of Advocacy. Small business loans are vital to many new and existing businesses, as well as those struggling to survive challenges brought on by the coronavirus pandemic. If you’re a business owner in Missouri, learn how to find and access small business loans.
How a Small Business Loan Can Help Your Missouri Business
Small business loans can be vital to businesses, providing much needed capital for:
- Startup costs
- Working capital
- Inventory and supplies
- Hiring new employees
Regardless of the loan purpose, finding the right source of financing is essential.
Types of Small Business Loans to Choose From
There are many different types of small business loans, and choosing the right financing option can be confusing. Here’s a rundown of the most popular choices:
Lines of credit: provides financing that can be accessed as needed. Interest is paid on outstanding balances. Good for short term needs including working capital.
Term loans: Fixed amount of funding with a set repayment period (2 – 25+ years). Excellent for specific projects such as renovation, equipment, etc.
Commercial real estate loans: Used to acquire real estate for the business to occupy and/or lease to other tenants.
Business credit cards: Fast flexible financing for short-term needs. Cards with introductory 0% APRs can be especially helpful.
Equipment financing: Loans or leases, it allows the business to acquire needed financing without a lot of upfront cash.
Invoice factoring: Used by businesses that have outstanding invoices owed to them by other businesses. Provides financing quickly based on those invoices.
Merchant cash advance: An advance against future sales (usually credit and debit card sales). Popular with businesses that need very fast funding but don’t qualify for other financing.
Microloans: Small loans— usually for less than $50,000— often available through nonprofit Community Development Financial Institutions. Can be helpful for startups as well as disadvantaged businesses.
Crowdfunding: Financing obtained by pitching prospective lenders through online platforms. Can be in the form of debt (loans), equity (investment in the business) or rewards (such as products).
What it Takes to Get Approved for a Small Business Loan
Most small business loan decisions hinge on several key factors. Each one of these may impact eligibility:
- Business revenues and financials
- Credit (business and/or personal credit)
- Time in business
Business Financials: Most lenders will have minimum income requirements that can range significantly depending on the type of loan and loan amount. They may verify revenues using business bank statements or by asking the entrepreneur to link a business bank account during the loan application process.
Some lenders (especially banks) may require borrowers to provide business tax returns, and personal tax returns as well. Some will require financial statements such as an up-to-date profit and loss statement.
Credit: Good credit will help increase loan options. Some lenders have minimum personal credit score requirements, and some will check business credit.
However, small business owners with bad credit may still have options, including crowdfunding, invoice factoring, merchant cash advances and some microloans. And some financing options don’t require excellent credit, including equipment financing and some online term loans or lines of credit.
Time in business: Most lenders prefer the business has at least two years in business. This makes it harder for startups to get financing. Business credit cards, crowdfunding and some microloans can be a good option for new businesses.
How to Choose the Right Loan for Your Missouri Small Business
Choosing the right small business loan involves a few steps.
- Figure out how much you need to borrow and how you’ll use the funds.
- Identify what types of financing you are likely to qualify for based on lender requirements and your qualifications.
- Find the best financing options for which you qualify
- Complete your loan application
This process can feel overwhelming, so don’t be afraid to get help from reliable sources who can help you understand your options.
Small Business Loan Options for Missouri
Here are several options to consider for financing for your Missouri business. In addition to these lenders, you may want to talk to a local bank or credit union. If you qualify, their terms will likely be favorable.
Line of Credit
Commercial Real Estate Loan
Business Credit Cards
Small Business Grant Options for Missouri
A small business grant provides money the business doesn’t have to repay. Grants are competitive, and it’s important to understand that the federal government does not give free money to start a business. Still, if you are willing to put in the work, you may be able to locate a grant program that is a fit for your business.
Learn how to find and apply for small business grants here.
Additional Resources for Missouri Small Businesses
There are a number of excellent organizations providing business resources to Missouri small business owners:
Free consulting or mentoring, and business education is available through several SBA resource partners, including Small Business Development Centers (SBDCs) and SCORE. They can also help with resources for businesses that want to get government contracts and do business with local, state or federal government agencies. Vetbiz (formerly Veteran Business Outreach Centers) helps veterans, transitioning service members and their spouses who want to start businesses.
All of these organizations can be an excellent resource to start or grow a business in Missouri.
The Missouri Business Services Division has three units that may be of assistance to those who do business in Missouri: Corporations Unit, Notaries & Commissions Unit, and UCC Unit. Their services are available statewide.
Local governments and economic development agencies may also provide financing or technical assistance to local businesses within a specific geographic area (say, greater St. Louis, for example, or Jefferson County).
There are some 35 Community Financial Development Financial Institutions (CDFIs) in the state of Missouri. CDFIs promote community development in distressed urban and rural communities by increasing the availability of credit, investment capital and financial services available. A list of Missouri CDFIs can be found here.
This article was originally written on January 24, 2022 and updated on January 28, 2022.