Small Business Loans
Learn All About Small Business Loans in Hawaii
Approximately 144,375 small businesses are located in Hawaii, where they represent 99.3% of all the companies in the state. From tourism-driven ventures in Waikiki to agricultural producers on the Big Island, these enterprises employ just over half of the state’s workforce.
Whether you’re launching a sustainable energy startup or expanding your local food truck fleet, finding small business loans in Hawaii can be a key step in your company’s development. Read on for what you need to know about securing financing for your small business.
- Key Points
- • The Hawaii Small Business Capital Program (HI-CAP) provides services like collateral support and direct loans to local businesses.
- • Hawaiian small businesses often have access to specialized lending products through organizations like the Hawaiian Council.
- • The state’s Manufacturing Assistance Program (MAP) offers reimbursements to help local manufacturers upgrade facilities and become more competitive.
- • There are a number of Small Business Administration (SBA) loans that are designed to meet the various needs of companies of different sizes and stages.
- • Before preparing an application for a business loan, it may be a good idea to check and correct your credit reports and gather supporting documentation.
Popular Types of Small Business Loans in Hawaii
Entrepreneurs in the Aloha State face a unique economic landscape dominated by high operating costs and a strong reliance on imports and tourism. Despite the challenges, many businesses manage to grow and flourish, often because they’re successful in obtaining the financing they need.
What follows is a brief rundown of the most common kinds of funding options available to business owners across the islands.
Hawaii Small Business Loan Programs
The state offers several initiatives to bridge the gap between traditional bank lending and business needs.
• The Hawaii Green Infrastructure Authority (HGIA) administers the HI-CAP program, which includes helpful options like “HI-CAP Collateral” — assisting businesses with insufficient assets to secure loans.
• The Community-Based Economic Development (CBED) Loan Program provides accessible financing to businesses that support local community values, particularly in agriculture and manufacturing.
Term Loans
When you need a lump sum of capital upfront, a term loan could be a good choice. If your application is approved, after you receive your funds you will begin paying back the loan, typically at a fixed rate of interest and usually on a monthly basis. Having a regular repayment schedule can help you budget in advance more effectively.
This regular structure can make term loans an appropriate choice when you’re financing large one-time investments that have a set, predictable cost. For instance, a hotel on Maui might use a term loan to renovate guest rooms, while a surfing school on Oahu could use one to purchase a new building.
Business Lines of Credit
When you’re facing an ongoing, unpredictable, or fluctuating expense, you might prefer a business line of credit to a term loan. WIth this type of financing, you gain access to a revolving pool of funds that you can draw from as needed up to a predetermined limit — similar to a credit card. Typically, you pay interest only on the money that you’ve actually withdrawn, and as you repay the balance, you replenish the amount you can draw out again. This kind of funding can be especially useful for seasonal businesses: For instance, a retail shop in Kona could use a line of credit to stock up on inventory to meet the demands of the busy winter holidays.
Equipment Financing
If you need to purchase specific physical assets for your company, such as machinery, vehicles, or technology, you might want to apply for equipment financing. A coffee farm in Kona could use equipment financing to pay for new processing machinery, for instance, while a construction firm in Hilo might use this kind of funding to acquire a new excavator. Because the equipment itself serves as collateral for your lender, these loans may be easier to get and often come with more favorable conditions than unsecured loans.
Small Business Administration (SBA) Loans
Private lenders may provide SBA loans, but these staples of small business lending are partially guaranteed by the U.S. Small Business Administration. This federal backing reduces the lender’s risk and the loan conditions may permit lower down payments and longer repayment terms. If you qualify, these Hawaii business loans are available through many approved banks and credit unions.
Below are the types of SBA loans that may be the most useful for small businesses.
• The SBA 7(a) loan. The 7(a) loan is very flexible: Amounts can range from $500 to $5 million. It’s often suitable for covering working capital, refinancing debt, or purchasing supplies.
• The SBA 504 loan is specifically meant for companies to use on major fixed assets, such as commercial real estate or heavy equipment. The maximum amount is between $5 million and $5.5 million.
• The SBA Microloan is meant to help with short-term needs and can be useful to companies that need startup loans. You can borrow up to $50,000 and the maximum repayment term is seven years.
Using an SBA loan calculator can help you estimate what your loan costs might be for different kinds of SBA funding.
Recommended: Small Business Financing Guide
How to Apply for a Small Business Loan in Hawaii
Applying for a Hawaii small business loan is a process that requires you to provide a clear picture of your company’s financial well-being and a thought-out plan for how you’ll spend the funds you receive. And beyond just these elements, preparation, backup, and clarity are key. Here’s how to apply for a small business loan.
Define Your Loan Purpose and Amount
Before you start getting in touch with possible lenders about their small business loans, it’s a good idea to have a precise understanding of your company’s funding needs. That means that you should be able to articulate exactly how much money your business needs, why, and how it will generate a return.
A specific proposal, such as “$50,000 to install solar panels to reduce energy costs,” can go a long way toward demonstrating your strategic thinking and financial discipline to possible lenders.
Know Your Credit Score
In general, it’s likely that your credit profile will be one of the first factors that a lender will review when considering extending a loan. Your personal credit scores will probably be scrutinized, with the credit score for a business loan that traditional banks are looking for often in the range of 680 or higher.
Because of this, it’s wise to check your reports before you apply in order to find any errors and have them corrected — and to understand your situation before you submit an application for a Hawaii small business loan.
Gather Your Key Documents
Ensuring that your application package is complete can speed up the review process and signal to a potential lender that you’re reliable and motivated. While requirements vary by lender, you should generally be prepared to provide the following:
• Credit report
• Income statement
• Bank statements
• Budget
• Income tax returns (both business and personal)
• Business plan
• Collateral valuation and supporting documents (which may include titles, deeds, or invoices)
Compare Lenders and Loan Offers
To find the financing that best fits your situation and needs, it can be important to shop around and compare options from multiple kinds of sources, including local community banks, large national institutions, and online lenders. Even within a lender type, offers may vary widely.
As you consider proposals, you might try using a business loan calculator to help you estimate the monthly payments for your different offers. It could also be beneficial to look closely at the Annual Percentage Rate (APR) of each loan to understand its true cost.
Submit Your Application and Await Approval
After you complete the application form and organize your supporting documents, you’re ready to submit the application package. Once it’s in your potential lender’s hands, you’ll need to wait for the response. This may take as little as two days in some cases, but can take several weeks in others.
Tips for Improving Your Loan Approval Chances
It might be possible to boost your odds of securing a loan by taking steps to strengthen your business’s financial foundation before you apply. Lenders typically look for evidence of the company’s stability and its ability to repay its debts. Presenting a financially strong, low-risk profile can be a good way to help a lender’s confidence. Here are some steps to try:
• Be sure you’ve got a realistic business plan that includes detailed financial projections.
• Work to strengthen your personal and business credit scores by making timely payments and paying down your existing balances.
• If you have collateral available, consider offering it as security to potentially bolster your application’s chance for approval with certain Hawaii business loans.
Other Funding Options for Hawaii Small Businesses
If a traditional loan isn’t the right fit for your company, there are also other ways to fund your needs. Hawaii’s entrepreneurs may be able to tap into several alternative possibilities to obtain capital. One of these options may align better with your specific stage of growth and industry.
Small business grants can be an alternative option and don’t have to be repaid.
Here are some grants and other assistance programs that can help small businesses in Hawaii:
• The Hawaii State Trade Expansion Program (HiSTEP) offers financial assistance to businesses looking to export their products internationally.
• The Hawaii Technology Development Corporation (HTDC) offers tech companies partial matching grants for federal SBIR awards.
• The Hawaii Manufacturing Assistance Program (HMAP) reimburses a portion of the cost of manufacturing improvements, especially if these are likely to improve the state or local economy.
You may also be able to find federal programs relevant to your industry by searching national databases like Grants.gov.
Crowdfunding is another viable route. Using a crowdfunding platform can help you raise smaller amounts of capital from a broad base of online supporters.
Additional Business Resources in Hawaii
Capital isn’t all you need to succeed in business. Oftentimes, doing well requires guidance and community. Fortunately, Hawaii has resources designed to help small business owners navigate challenges. The Hawaii Small Business Development Center (HSBDC) is a prominent resource in the area, offering no-cost advising at centers on Oahu, Maui, Kauai, and the Big Island.
If you’re looking for mentorship, local SCORE chapters connect entrepreneurs with experienced business leaders who volunteer their time. Additionally, the Hawaiian Council (formerly known as the Council for Native Hawaiian Advancement) provides specialized training, like the KuHana Program for entrepreneurs. Getting involved with your local Chamber of Commerce can also provide valuable networking opportunities.
The Takeaway
Securing a Hawaii small business loan could be the decisive factor that allows your company to expand and flourish. While the process demands careful planning, it should be an achievable step for a focused entrepreneur. By defining your goals and using your state and local resources, you could be able to find the right financing solution for your business.
If you’re seeking financing for your business, SoFi is here to support you. On SoFi’s marketplace, you can shop and compare financing options for your business in minutes.
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FAQ
How do I get a small business loan in Hawaii?
If you want to get a Hawaii business loan, start by defining your company’s funding needs and checking your credit scores. Gather essential documents like your business plan, tax returns, and bank statements so you can fill out your application quickly and easily. Finally, it may help to compare options from a variety of lenders to find the best terms for your Hawaii small business loan and then apply.
Can I get a startup business loan with no money?
Obtaining a startup business loan without money can be challenging, since most lenders require an owner’s investment. However, some SBA microloans are designed for startups and have lower capital requirements. Another option is to research business grants, which provide funding that doesn’t require repayment.
How hard is it to get a small business loan in Hawaii?
How difficult getting a Hawaii business loan is depends largely on your business’s financial health, time in operation, and credit history. Traditional bank loans can be competitive and often have stricter criteria. Online lenders often offer more flexible requirements, making them a more accessible option for many Hawaii businesses.
What is the easiest type of business loan to get approved for?
Loans secured by collateral, such as equipment financing loans, are generally easier to obtain than unsecured loans because the asset lowers the lender’s risk. Short-term loans and invoice financing from online lenders typically also have less stringent requirements.
What credit score do I need for a small business loan?
Requirements vary, but for traditional bank and SBA loans, a personal credit score of 680 or higher is often preferred. Some online lenders may approve applicants with scores in the low 600s. It’s also worth bearing in mind that higher scores generally lead to better approval odds and lower interest rates.
What can I use a Hawaii small business loan for?
You can use a small business loan for almost any legitimate business purpose, and typical uses include purchasing inventory, buying equipment, funding marketing campaigns, and refinancing debt. Personal expenses are prohibited.
Are there any small business grants available in Hawaii?
Yes, grants are available from a number of sources, such as the Hawaii Technology Development Corporation (HTDC). You can search national databases like Grants.gov for federal programs relevant to your industry.
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