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More than half a million small businesses call Missouri home and in turn employ some 1.2 million Missourians according to the SBA Office of Advocacy. Small business loans are essential for many new and existing businesses, as well as those struggling to survive the challenges posed 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 Business in Missouri

Small business loans can be vital for businesses, providing much-needed capital for:

  • start-up costs
  • Working capital
  • Expansion
  • Inventory and supplies
  • Equipment
  • Marketing
  • Hiring new employees

Whatever the purpose of the loan, finding the right source of financing is essential.

Types of small business loans to choose from

There are many types of small business loans and choosing the right financing option can be confusing. Here is an overview of the most popular choices:

Lines of credit: offers accessible financing if needed. Interest is paid on unpaid balances. Good for short-term needs, including working capital.

Term loans: Fixed financing amount with a defined repayment period (2 to 25 years and more). Excellent for specific projects such as renovation, equipment, etc.

Commercial real estate loans: Used to acquire real estate for the company to occupy and/or rent to other tenants.

Business credit cards: Fast and flexible financing for short-term needs. Cards with 0% introductory APRs can be particularly useful.

Equipment financing: Loans or leases, it allows the company to acquire the necessary financing without a lot of upfront money.

Factoring invoice: Used by businesses that have unpaid invoices owed to them by other businesses. Provides financing quickly based on these invoices.

Merchant Cash Advance: An advance on future sales (usually credit and debit card sales). Popular with businesses that need very quick funding but don’t qualify for other funding.

Microcredits: Small loans, usually less than US$50,000, often available from non-profit community development financial institutions. Can be useful for startups as well as disadvantaged companies.

Crowdfunding: Funding obtained by introducing potential lenders through online platforms. Can take the form of debt (loans), equity (investment in the business) or rewards (like products).

What it takes to get approved for a small business loan

Most small business loan decisions depend on several key factors. Each of these can affect eligibility:

  • Company turnover and finances
  • Credit (professional and/or personal credit)
  • Time spent in business
  • Industry

business finance: Most lenders will have minimum income requirements which can vary greatly depending on the type of loan and the amount of the loan. They can verify income 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 as well as personal tax returns. 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 term loans or online lines of credit.

Time spent in business: Most lenders prefer that the business be at least two years old. This makes it harder for startups to secure funding. 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.

  1. Determine how much you need to borrow and how you will use the funds.
  2. Identify the types of financing you are likely to qualify for based on the lender’s requirements and your qualifications.
  3. Find the best financing options you qualify for
  4. Complete your loan application

This process can seem overwhelming, so don’t be afraid to get help from trusted sources who can help you understand your options.

Small Business Loan Options for Missouri

Here are several options to consider for financing your business in Missouri. 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.

Credit line

term loan

Invoice financing

Commercial real estate loan

Equipment financing

SBA loan

Business credit cards

Small Business Grant Options for Missouri

A small business grant provides money that the business does not have to repay. The grants are competitive and it is important to understand that the federal government does not give free money to start a business. Still, if you’re willing to put in the work, you might be able to find a grant program that’s right 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 great organizations providing business resources for small business owners in Missouri:

Free counseling or mentoring and business training is available through several SBA resource partners, including the Small Business Development Centers (SBDC) and SCORE. They can also provide resources for businesses seeking government contracts and doing business with local, state, or federal government agencies. Vetbiz (formerly Veteran Business Outreach Centers) helps veterans, transitioning military members, and their spouses looking to start a business.

All of these organizations can be a great resource for starting or growing a business in Missouri.

The Missouri Business Services Division has three units that may be helpful to those doing business in Missouri: the Corporations Unit, the Notaries and Commissions Unit, and the UCC Unit. Their services are available statewide.

Local governments and economic development agencies may also provide funding or technical assistance to local businesses in a specific geographic area (eg, Greater St. Louis, or Jefferson County).

There are some 35 community financial development institutions (CDFIs) in the state of Missouri. CDFIs promote community development in struggling urban and rural communities by increasing the availability of credit, investment capital, and available financial services. A list of Missouri CDFIs can be found here.

This article was originally written on January 24, 2022.

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