How to Get a Small Business Loan in Alabama
If you own a small business in Alabama or have plans to do so, business financing options should be on your radar. In this blog post, we’ll go over the various types of small business loans in Alabama so you can choose the best options for your unique needs.
Uses for a Small Business Loan in Alabama
Because most Alabama small business loan options are flexible, you can use them to cover a variety of business expenses. Some of these costs may include:
- Commercial property
- Real estate, payroll, and utilities
- Expansion costs
Types of Small Business Loans in Alabama
Not all small business loans in Alabama are created equal. In fact, there are plenty of different options out there, each with their own set of pros and cons. The nature of your business, amount of funding you need, and your particular goal will determine which loans are right for you.
SBA loans are guaranteed by the U.S. Small Business Administration (SBA). Popular SBA loan programs include the 504 loan and 7(a) funding program.
As long as you have a good credit score and don’t mind a longer application process, you can land a low interest rate. You might also secure a longer repayment term than you’d be able to elsewhere. Most SBA loan offers cap at $5 million with terms of up to 24 years.
Small Business Loans
Offered by banks, credit unions, and online lenders, traditional bank loans are installment loans. This means, you’ll receive a lump sum of money upfront once you’re approved for funding.
Then, you’ll repay what you borrow over an agreed upon term, ranging from a few months to several years or even longer.
If you apply for a term loan from a bank, know that you’ll likely have to wait weeks or even months to get approved and funded. Therefore, if you have urgent, short term financing needs, you may benefit from pursuing a different type of additional working capital.
Line of Credit
Compared to traditional bank loans, lines of credit are more flexible. Upon approval, you’ll be able to pull funds whenever you’d like, up to a set credit limit. While a secured line of credit might be easier to qualify for, it will require you to put up an asset like inventory or equipment as collateral. If you default on your line of credit, a lender may seize it.
Business Credit Cards
Business credit cards work exactly like personal credit cards; you’ll be able to use them as much or as little as you’d like to pay for day-to-day expenses.
Since there are countless cards available, do your research and find a few that offer the rewards and perks that appeal to you most. If you find a card with an annual fee, make sure the benefits outweigh it.
Chances are you rely on equipment to run your business. With an equipment loan, you can receive the funding you need to purchase new or used equipment such as computers for your office or ovens for your restaurant. To take one out, you’ll need to bring a quote to your lender and show them how much the equipment will cost. Since it’s specifically designed to cover equipment costs, you won’t be able to use the funds for anything else.
Merchant Cash Advance
A merchant cash advance (MCA) is when you receive a lump sum of cash upfront in exchange for your future debit and credit card sales. Instead of an interest rate, you’ll be charged a factor rate, which is a figure that reflects the total amount to be repaid. While an MCA can offer fast funding, it may be expensive.
Invoice factoring is when you sell your unpaid invoices to a factoring company. The company can advance anywhere from 70% to 90% of the invoices. Once customers pay them, they’ll send the remaining balance of the invoices to your business bank account minus their fees. Factoring fees usually range from 1% to 5% per invoice.
Resources for Alabama Business Owners
If you own a small business in Alabama, you might find these resources useful as you grow your business operations.
- Alabama Small Business Development Center (ASBDC): ASBDC provides free business advising services that can help you launch or grow your business. You can also take advantage of its free or low cost webinars, which cover various business topics.
- Shoals Business Incubator (SBI): SBI in Florence, AL is designed for entrepreneurs who would like business counseling and technical assistance in a unique, flexible commercial space. You can enjoy access to high speed internet, modern conference rooms, high resolution printers and scanners, a notary public, and more.
- Alabama Department of Revenue: The Alabama Department of Revenue offers Business Essential for State Taxpayers (B.E.S.T.) resources and learning modules. It can make taxes easier, regardless of if you’re a new or established small business.
- Atlas Alabama: Atlas Alabama is an online portal with a variety of resources for small business owners in the state. It’s divided into four sections, including plan, launch, manage, and grow.
Set Your Alabama Venture Up for Success with Alabama Business Loans
With a bit of time and research, you’re sure to find small business loans in Alabama that can steer you toward success. Before you commit to any financing offers, however, make sure you’re aware of their rates, terms, and fees. You should also review your business plan and consider your short and long term goals.
By being thorough in your research and planning, you can be confident in your decision to pursue a small business loan for your Alabama-based venture.
Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author's alone, and have not been reviewed, approved, or otherwise endorsed by any of these entities.