Small Business Loans
Learn All About Small Business Loans in Illinois
There are approximately 1.4 million small businesses in Illinois. In fact, they account for 99.6% of all enterprises in the state. From the global tech hub of Chicago to the rich agricultural heartland downstate, these companies employ more than 43% of the state’s workforce.
Whether you’re launching a logistics firm in Joliet or expanding a family farm outside Decatur, finding small business loans in Illinois can be a key step. Here’s what you need to know about securing financing for your company.
- Key Points
- • The Advantage Illinois program utilizes federal State Small Business Credit Initiative (SSBCI) funds to offer a participation loan program that can lower interest rates for small businesses.
- • Manufacturers in Illinois may be able to leverage equipment financing to modernize production lines and maintain competitive advantages.
- • The Department of Commerce and Economic Opportunity (DCEO) manages specific funding and training programs for minority-, women-, and/or veteran-owned enterprises.
- • Agribusinesses in central and southern Illinois may turn to specialized lending to fund seasonal planting and harvesting operations.
- • Tech startups in the Chicago metro area may be able to utilize venture debt and lines of credit to bridge gaps between funding rounds.
Popular Types of Small Business Loans in Illinois
Entrepreneurs in the Prairie State benefit from a diverse financial ecosystem that supports a wide range of industries. Below are the most common funding options available to business owners across Illinois.
Illinois Small Business Loan Programs
The state actively fosters economic growth through the Advantage Illinois initiative. This program includes a Participation Loan Program (PLP) in which the state purchases a portion of a bank loan, reducing the lender’s risk and often resulting in lower interest rates for the small business borrower.
Additionally, the Illinois Finance Authority has programs that offer lower-interest loans and grants to Illinois small businesses.
Term Loans
A term loan can provide a small business with an upfront lump sum of capital. The principal, along with interest, which is usually charged at a fixed rate, is then repaid in regular payments over a specific period of time (the term). Having a fixed, predictable repayment structure can be useful for company budgeting, while the fact that these loans come in a lump sum means that they can be helpful for funding large one-time investments.
For example, a restaurant in Naperville might use a term loan to renovate its dining space, while a logistics firm in Rockford could use one to purchase a new warehouse facility.
Business Lines of Credit
Unlike a term loan, a business line of credit can give your business access to a revolving pool of funds that you can draw from as you need money, up to a preset limit. You owe interest only on the money you take out, and as you repay the balance, you replenish the pool of funds and can withdraw more again.
Business lines of credit can be especially helpful for companies that are subject to seasonal fluctuations in supply or demand or face other cash flow unevenness. A marketing agency in Evanston, for example, might make use of a line of credit to manage payroll while waiting for quarterly client invoices to be paid.
Equipment Financing
If there’s a specific physical asset you need to purchase for your business, like machinery, vehicles, or technology, you might want to apply for equipment financing. For instance, a corn farmer near Champaign might consider equipment financing to purchase a new combine, while a manufacturing plant in Peoria might use it to acquire automated assembly robots.
Since the equipment itself serves as collateral for the lender, equipment financing loans may be easier to obtain than unsecured loans and often come with more favorable terms.
SBA Loans
Private lenders actually supply qualifying small businesses with SBA loans, but these lending products are partially guaranteed by the U.S. Small Business Administration. This federal backing reduces risk for the lender and the loan conditions may permit lower down payments and longer repayment terms. If you qualify, these Illinois business loans are available through many approved banks and credit unions.
Below are some types of SBA loans that are commonly used by small businesses.
• The SBA 7(a) loan. The 7(a) loan is very flexible: Amounts can range from $500 to $5 million. It’s 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 Illinois
Applying for Illinois small business loans involves providing potential lenders with an in-depth, easy-to-understand look at your company’s financial well-being and a defined plan for how you’ll spend the funds you receive.
Here’s a step-by-step breakdown of how to apply for a small business loan in Illinois.
Define Your Loan Purpose and Amount
Before you contact any lenders, it’s important to have a precise understanding of your funding needs. You should be able to articulate exactly how much money your business requires and how the funds will generate a return. A specific proposal, such as “$50,000 to upgrade our inventory management software, which we anticipate will lead to a 5% increase in revenue” demonstrates your strategic thinking and financial acumen.
Know Your Credit Score
Your credit profile will likely be a significant factor in any lender’s review of your Illinois business loan application. Lenders will probably scrutinize your personal credit scores, and traditional banks often require a credit score for a business loan to be in the range of 680 or higher. Other lenders, like online banks, may be willing to look at slightly lower scores.
Because of this, it’s smart to review your reports before you apply so that you can find any errors and have them fixed — and to be sure you understand your financial situation before you submit your application for an Illinois small business loan.
Gather Your Key Documents
Presenting an application package that’s organized and 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 usually be prepared to produce 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
Shopping around for your Illinois small business loans can go a long way toward helping you find the financing that best fits your business’s needs, since different banks may offer very different options on term loans, for instance. It’s also a good idea to compare options from multiple kinds of sources, including local community banks, large national institutions, and online lenders.
As you evaluate financing proposals, consider using a business loan calculator to help you estimate the monthly payments for different options. It may also be a good idea to look closely at the Annual Percentage Rate (APR) of each loan to understand its true cost.
Submit Your Application and Await Approval
Once you’ve filled out the application form and organized your supporting documentation, you’re ready to submit the application package. After your lender has it, you’ll need to wait for its response. This can take as little as two days in some cases, but may take several weeks in others.
Tips for Improving Your Loan Approval Chances
You might be able to increase your chances of securing a loan by taking steps to strengthen your business’s financial profile before you apply. Lenders usually want to see evidence of your business’s stability and ability to repay the loan. Presenting a financially strong, low-risk profile may help with building a lender’s confidence.
Here are some steps to consider:
• Ensure that you’ve got a realistic business plan that includes detailed financial projections.
• Work to strengthen your business and personal credit scores by paying down your current balances and making timely payments.
• If you have available collateral, consider offering it as security to potentially bolster your application’s chance for approval with certain Illinois business loans.
Other Funding Options for Illinois Small Businesses
If a traditional loan isn’t the right fit for your business, there may be other ways to fund your business. Illinois’s entrepreneurial ecosystem offers several alternative paths to capital. One of these options may align better with your business’s specific stage of growth or industry.
Small business grants can be a highly sought-after option because you don’t have to repay them. In Illinois, for instance, the Illinois DCEO manages grants like the Illinois Grocery Initiative to support food access and the Small Business Innovation Research/Small Business Technology Transfer (SBIR/STTR) Matching Grant Program, which helps tech companies leverage federal research funds.
Crowdfunding can be another viable route, too, as it allows businesses to raise smaller amounts of capital online from a broad base of supporters.
Additional Business Resources in Illinois
In addition to capital, success in business often requires guidance and a supportive community. Illinois boasts a healthy network of resources designed to help small business owners navigate challenges. The Illinois Small Business Development Center (SBDC) can be a helpful resource, offering advice and other services at centers located throughout the state.
For mentorship, local SCORE chapters connect entrepreneurs with experienced business leaders who volunteer their time. Additionally, the Illinois DCEO provides video help and free advisory services. Engaging with your local Chamber of Commerce can also provide valuable networking opportunities.
The Takeaway
Securing an Illinois small business loan can be the decisive factor that allows your company to expand — and flourish. While obtaining funding requires careful planning, a focused entrepreneur can generally accomplish it. By defining your goals and utilizing the resources available to you, you should ultimately be able to find the right financing solution for your small 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 Illinois?
Start by defining your small business’s funding needs and checking your credit scores. Gather essential documents like your business plan, tax returns, and bank statements to make it easier to complete your application and submit it. Finally, compare options from various lenders to find the best terms for your Illinois small business loan.
Can I get a startup business loan with no money?
Obtaining a startup business loan with no money can be tricky, since most lenders require an owner’s investment. However, some SBA microloans are designed for startups and may be easier to get. Another option is to look into business grants, which provide funding that doesn’t need to be repaid.
How hard is it to get a small business loan in Illinois?
The degree of difficulty depends on your business’s financial health, time in operation, and credit history. Traditional bank loans can be challenging to qualify for, but online lenders often offer more flexible requirements, making them a more accessible option for many Illinois 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 because the asset reduces the lender’s risk. Short-term loans and invoice financing from online lenders also typically 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. Higher scores generally lead to better approval odds and lower interest rates.
What can I use an Illinois small business loan for?
You can use a small business loan for almost any legitimate business purpose. Common uses include purchasing inventory, buying equipment, funding marketing campaigns, and refinancing debt. Using the loan for personal expenses is prohibited.
Are there any small business grants available in Illinois?
Yes, grants are available from multiple sources. The Illinois DCEO can be an excellent resource for finding state-level opportunities like the SBIR/SBTT Matching Grant Program. You can also search national databases like Grants.gov for federal programs relevant to your industry.
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