Small Business Loans
Learn All About Small Business Loans in Indiana
Indiana is home to approximately 591,671 small businesses, accounting for 99.4% of all enterprises in the state. From the manufacturing hubs of Elkhart to the major distribution crossroads in Indianapolis, these companies employ nearly 44% of the state’s workforce.
Whether you’re launching a tech startup in Bloomington or expanding your rural family farm, finding small business loans in Indiana can be a key step in developing your business. Here’s what you need to know about securing financing for your company.
- Key Points
- • The Legend Fund, a state loan participation program, incentivizes lenders to provide capital to underserved small business owners.
- • Manufacturing Readiness Grants offer matching funds to companies investing in smart technologies and automation.
- • Nonprofit lender Bankable acts as a Community Development Financial Institution (CDFI), offering loans to businesses that may not qualify for traditional bank financing.
- • The Capital Access Program (CAP) creates a reserve fund to protect lenders against losses, encouraging them to approve higher-risk loans.
- • Agricultural producers may benefit from equipment financing to maintain the heavy machinery required for planting and harvesting.
Popular Types of Small Business Loans in Indiana
Hoosier entrepreneurs have access to a diverse array of financing structures tailored to the state’s strong industrial and agricultural roots. The following sections outline the most common funding options available to business owners across Indiana.
Indiana Small Business Loan Programs
The state actively fosters economic growth through the Indiana Economic Development Corporation (IEDC). For instance, the IEDC manages the Legend Fund, which purchases a portion of loans made by local lenders to reduce their risk and improve terms for borrowers. There’s also the Capital Access Program (CAP), which creates a reserve fund to reduce risk for lenders and lead them to approve loans they might otherwise reject.
Bankable, a nonprofit lender, acts as a Community Development Financial Institution (CDFI) in the state, and provides loans to businesses that might not be able to access traditional bank financing.
Term Loans
With a term loan, a lender provides a small business with an upfront lump sum of capital. Over a specified period (the term), the borrower then makes regular payments to repay the principal and interest, which is usually at a fixed rate. This structure can make a term loan an appealing option for financing large, one-time investments with predictable costs. For example, an auto parts manufacturer in Fort Wayne might use a term loan to expand its production floor.
Business Lines of Credit
Unlike a term loan, a business line of credit can give you access to a revolving pool of funds that you can draw from as you need, up to a predetermined limit. Typically, you pay interest only on the money you actually withdraw, and as you repay the balance, you replenish the pool of funds and the money becomes available for withdrawal again.
Lines of credit can be helpful for businesses that have seasonal lulls or uneven cash flow. For example, a logistics company in Gary could use a line of credit to manage fuel and payroll costs while waiting for shipping invoices to be paid.
Equipment Financing
If you need to purchase a specific physical asset for your business, like machinery, vehicles, or technology, you might want to apply for equipment financing. For instance, if you’re a corn farmer outside Lafayette, you could use an equipment financing loan to procure a new combine, or if you have a construction firm in Evansville, you might use one to acquire a new crane.
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
SBA loans are actually provided by private lenders, but they’re partially guaranteed by the U.S. Small Business Administration. This federal backing reduces the lender’s risk so the loan conditions may allow lower down payments and longer repayment terms than other types of loan. If you qualify, these Indiana business loans are available through many approved banks and credit unions.
Here 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.
You can use an SBA loan calculator to 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 Indiana
When your company is applying for Indiana small business loans, you’ll want to provide a prospective lender with an in-depth, easy-to-understand look at strong company financials and a defined plan for how you’d spend the funds you receive.
Here’s a step-by-step breakdown of how to apply for a small business loan in Indiana.
Define Your Loan Purpose and Amount
Before contacting lenders, it may be a good idea to have a precise understanding of your business’s funding needs. That means that you should be able to articulate exactly how much money you need, what it will be used for, and how it will generate a return. A specific proposal, such as “$50,000 to upgrade our inventory management system, which we project will raise revenues 5%” demonstrates to the lender that you’re thinking strategically about your finances and building your business.
Know Your Credit Score
Your credit profile will likely be a significant factor in any lender’s review of your Indiana 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 the importance of your scores, it may be beneficial to review your reports before you apply so that you can find any errors and have them fixed — and to be sure you fully understand your financial situation before you submit your application for an Indiana small business loan.
Gather Your Key Documents
Handing in an application package that’s organized and complete can help speed up the review process and signal to a potential lender that you’re a motivated, reliable borrower. While requirements will vary among lenders, you’re likely to be asked for some or all of 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
When you’re in the market for an Indiana small business loan, shopping around can help you find the financing that best suits your business’s needs, since different banks can offer very different options on term loans, for instance. It may also be a good idea to compare options from multiple kinds of sources, including local credit unions, large national institutions, and online lenders.
As you evaluate financing proposals, you might want to use 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
After you’ve filled out the application form and gathered your supporting documentation, you should be ready to submit the application package. Once that’s done, you’ll need to wait for the lender’s 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 odds of securing a loan by taking steps to strengthen your company’s financial profile before you apply for it. Lenders typically want to see evidence of your business’s stability as well as its ability to repay the loan. Presenting a financially strong, low-risk profile could help your application.
Here are a few steps to consider taking:
• Ensure that your business plan is realistic and includes detailed financial projections.
• Pay down credit balances and make all your payments on time to work toward strengthening your business and personal credit scores.
• If you have available collateral, consider offering it as security to potentially bolster your application’s chance for approval with certain Indiana business loans.
Other Funding Options for Indiana Small Businesses
If a traditional loan isn’t the right fit for your needs, there are other ways to fund your business. Indiana’s entrepreneurial ecosystem offers several alternative paths for capital. One of these possibilities may align better with your business’s specific stage of growth or industry.
Small business grants can be a highly sought-after option because they don’t have to be repaid. The Indiana Small Business Development Center (ISBDC) helps connect businesses with grant opportunities like the Small Business Innovation Research/Small Business Technology Transfer (SBIR/STTR) Matching Grant Program, which matches a portion of federal research funds awarded to tech companies, and the Indiana Technical Assistance Program (INTAP), which provides technical assistance to help companies complete growth and improvement projects. Additionally, there’s the Manufacturing Readiness Grants program, which helps industrial businesses modernize their operations with new technology.
Crowdfunding may be another viable route. Using a crowdfunding platform can help your business raise smaller amounts of capital online from a broad base of supporters.
Additional Business Resources in Indiana
Beyond just capital, success in business often requires experienced guidance and a supportive community. Indiana has a robust network of resources designed to help small business owners navigate challenges. The Indiana Small Business Development Center (ISBDC) can be a useful resource, offering no-cost advising at 10 regional offices across the state.
For mentorship, local SCORE chapters connect entrepreneurs with experienced business leaders who volunteer their time. Additionally, organizations like Bankable offer coaching alongside their lending products. Engaging with your local Chamber of Commerce can also provide valuable networking opportunities.
The Takeaway
Securing an Indiana small business loan can be the factor that allows your company to expand. While the process involves careful planning, a focused entrepreneur should be able to complete it successfully. By defining your goals and utilizing the available resources, you could ultimately be able to find the right financing solution for you.
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 Indiana?
If you’re looking for Indiana small business loans, start by defining your funding needs and checking your credit scores. Then gather essential documents like your business plan, tax returns, and bank statements so that you’ll have them ready as you put together your application and submit it. Finally, compare your options from various lenders to find the one with the most advantageous terms for your business.
Can I get a startup business loan with no money?
It can be challenging, as most lenders require an owner’s investment. However, some SBA microloans designed for startups may have lower capital requirements. Another option is to research business grants, which provide funding that does not need to be repaid.
How hard is it to get a small business loan in Indiana?
The degree of difficulty depends on your business’s financial health, time in operation, and credit history. Traditional bank loans can have strict qualifications. Online lenders may have more flexible requirements, making them a more accessible option for many Indiana businesses.
What is the easiest type of business loan to get approved for?
Loans secured by collateral, such as equipment financing, are generally easier to obtain because the asset lowers 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. Bear in mind, however, that higher scores may lead to better odds of being approved and lower interest rates.
What can I use an Indiana 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, or refinancing debt. You can’t use a small business loan for personal expenses.
Are there any small business grants available in Indiana?
Yes, grants are available from a variety of sources. The Indiana Small Business Development Center (ISBDC) is a useful resource for finding state-level opportunities like the Manufacturing Readiness Grants. You can also search national databases like Grants.gov for federal programs relevant to your industry.
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