Alabama small business owners sometimes need a little boost to keep them going. That’s where small business loans can be useful: ideally, you borrow money to grow your business, and the increase in profit or sales you get as a result will be more than the interest and fees you pay. From there, it’s up to you how high you take your business!
How a Small Business Loan Can Help in Alabama
What are your dreams for your Alabama business? Maybe you want to keep it thriving so you can pass it down to your children. Or maybe you’d like to open a second location. Hire employees. Expand your offerings.
All of those things cost money. If you don’t have it in the bank, a small business loan can be the solution.
Options for Small Business Loans in Alabama
With so many financing options available, it may be hard to narrow it down!
Because of the negative impact the COVID-19 pandemic has had on so many Alabama businesses, there are now disaster assistance business resources at both the federal and state level.
At the federal level, we have the Paycheck Protection Program (PPP), and the Economic Injury Disaster Loan (EIDL). Part of these loans may be forgiven if you qualify. The SBA has stopped authorizing new PPP loans, but if that changes, we’ll make sure and update this article.
At the state level, there was the Coronavirus Relief Fund. Note that currently, the funds have been depleted, but possibly they could be renewed should the pandemic continue.
If you’re looking for a larger sum to borrow, maybe for refinancing an existing loan or for growing your business, if you’ve got excellent credit, you may qualify for a long-term loan with a credit union or bank.
Another option if you’ve got good credit is a loan through the U.S. Small Business Administration. It has many low-interest loan programs that can be used for things like real estate, equipment, and working capital, as well as those specifically designed for economic development.
Line of Credit
If a loan isn’t quite the right fit, a line of credit might be better, since you can access some of your funds now and more down the line when you need them.
Business credit cards can provide you with an easy way to purchase office supplies and other things for your business, and if you get a card with rewards, you can earn perks on what you spend.
If you don’t have good credit, short-term loans offer a solution to help you get the capital you need but be warned: these do have higher interest rates.
If you invoice clients, invoice financing lets you borrow against the value of invoices, minus a fee.
How Do I Qualify for a Small Business Loan in Alabama?
Lenders look at different criteria to determine whether borrowers are eligible for financing, and if so, what rate they qualify for. Some criteria more than others indicate a borrower is more likely to be able to pay back that loan.
Credit scores are one such factor. If your credit scores are high, that tells lenders that it’s likely you’ll be financially responsible enough to pay back the loan. If your scores are low, you may be seen as more of a risk.
Other factors that lenders look at include how long your business has been in operation and your annual revenues.
How Do I Apply for a Small Business Loan in Alabama?
Once you’ve landed on the financing option and lender that’s the right fit, review its requirements for applying and gather what you need in advance.
If you apply online, you likely won’t need to provide more than a few details about your business, your annual revenues, and your Social Security number. If you apply for a bank or SBA loan, you may need to apply in person and provide more documentation, including financial statements, business plan, and tax returns.
Don’t have a business plan? Not to worry. Alabama has great small business resources that can help you, such as the Alabama Small Business Development Center (SBDC).
Who is Eligible for SBA Loans?
If you’re considering financing through the Small Business Administration, first review eligibility requirements at SBA.gov.
While some SBA loans have specific requirements beyond these, all of the below apply to SBA loans.
- Your business must be for profit
- It must do business (or plan to do business) in the U.S. or its territories
- You must have reasonable owner equity to invest
- You must have already sought other financial resources, including personal assets
Does it Take Money to Get a Business Loan in Alabama?
While there are some great lenders out there, be aware that there are also lenders who would take advantage of you. You should never give money to get a loan. The caveat is if you have poor credit and apply for a secured loan. In that case, you will be required to provide some form of collateral, which could be equipment, real estate, or even, yes, cash.
And there may be fees with taking out a loan but typically those are taken from the amount you borrow.
If a lender says you need to pay them before even applying, run. They are not reputable.
Small Business Financing in the Great State of Alabama
Whether your business is in Birmingham, Montgomery, or somewhere in between, be smart about money. Taking out financing could help your business grows in ways you never could grow if you bootstrapped.
This article was originally written on June 15, 2021 and updated on July 13, 2021.