Small Business Loans
Learn All About Small Business Loans in Louisiana
There are more than 511,000 small businesses in Louisiana, which account for approximately 99.5% of all enterprises in the state. From the seafood processors along the Gulf Coast to the energy support firms in the Bayou Region, these companies employ over half of the state’s private workforce.
Whether you are launching a tourism venture in New Orleans or expanding an agricultural operation in the northern parishes, finding small business loans in Louisiana can be a key step. Here’s what you need to know about securing financing for your company.
- Key Points
- • The State Small Business Credit Initiative (SSBCI) offers a Micro Lending Program (MLP) that provides direct loans up to $100,000 for smaller financing needs.
- • Louisiana’s Collateral Support Program (CSP) helps businesses secure financing by pledging cash deposits to cover companies’ collateral shortfalls with lenders.
- • The Small and Emerging Business Development (SEBD) program offers managerial and technical assistance to certified small businesses.
- • The Hudson Initiative certification helps small businesses gain greater access to state purchasing and contracting opportunities.
- • Agricultural producers and seafood businesses can rely on equipment financing to maintain their vessels and heavy machinery.
Popular Types of Small Business Loans in Louisiana
Entrepreneurs in the Pelican State can benefit from a unique mix of state-sponsored support and private lending options tailored to key local industries. The sections below describe the most common funding options available to business owners in Louisiana.
Louisiana Small Business Loan Programs
The state actively fosters economic growth through Louisiana Economic Development (LED). LED manages the State Small Business Credit Initiative (SSBCI), which includes the Micro Lending Program, providing loans of up to $100,000 for businesses needing smaller amounts of capital. And Louisiana’s Collateral Support Program (CSP) pledges cash deposits to help cover companies’ collateral shortfalls so they can secure loans. And Louisiana’s Collateral Support Program (CSP) pledges cash deposits to help cover companies’ collateral shortfalls so they can secure loans. Additionally, the Small Business Loan Guaranty Program provides guarantees to banks, allowing them to lend to businesses that might not otherwise qualify for traditional financing.
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 defined period of time. A predictable repayment structure can be useful as you prepare monthly budgets, and because the funds come in a lump sum, these loans can be well-suited to funding large, one-time investments. For example, a restaurant in Baton Rouge might use a term loan to renovate its dining room.
Business Lines of Credit
In contrast to a term loan, a business line of credit can give you access to a pool of funds that you can draw from as you need, up to a predetermined limit. 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 is generally available for withdrawal again.
Lines of credit can be helpful for businesses that have seasonal lulls or uneven cash flow. For example, a festival vendor in Lafayette could use a line of credit to purchase inventory ahead of Mardi Gras.
Equipment Financing
If your business is in need of a specific physical asset, like machinery, vehicles, or technology, you might consider applying for equipment financing. A shrimper in Houma could use this to finance a new boat engine, while a chemical manufacturer in Lake Charles might use it to acquire specialized safety gear.
Because the equipment itself serves as collateral for the lender, equipment financing loans can be easier to obtain than unsecured loans. Additionally, they may often come with more favorable terms.
SBA Loans
Private lenders are the actual issuers of SBA loans, but this financing is partially guaranteed by the U.S. Small Business Administration. That federal backing reduces the lender’s risk, so the loan conditions may allow lower down payments and longer repayment terms. If you qualify, these Louisiana business loans are available through many 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 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 may 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 Louisiana
Applying for a Louisiana small business loan requires preparation and attention to detail. You’ll need to provide prospective lenders with a clear picture of your company’s financial health and a well-developed plan for how their funds would be used.
Here’s a step-by-step breakdown of how to apply for a small business loan in Louisiana.
Define Your Loan Purpose and Amount
Before you begin contacting prospective lenders, it’s a good idea to have a precise understanding of your funding needs so that you can articulate exactly how much money your company needs and how it will generate a return. A specific proposal, such as “$50,000 to upgrade our cold storage facilities, which should prevent 35% of spoilage loss” demonstrates to lenders that you’re thinking strategically about your finances.
Know Your Credit Score
When reviewing your Louisiana business loan application, prospective lenders will usually pay particular attention to your company’s credit profile. They’ll probably scrutinize your personal credit scores, too: Traditional banks often require a credit score for a business loan in the range of 680 or higher. Other lenders, like online banks, may be willing to look at slightly lower scores.
Because of your scores’ importance, it’s smart to review your credit reports before you apply so that you can find any errors and have them fixed — and be sure you fully understand your financial situation before you submit your application for a Louisiana small business loan.
Gather Your Key Documents
Submitting an application package that’s organized and complete can speed up the review process and show a potential lender that you’re reliable and motivated. While requirements vary by lender, you should usually be ready 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
When you’re looking at Louisiana small business loans, shopping around can help you find the financing that best suits your needs, since different banks may offer very different options on term loans, for instance. It may also be beneficial to compare options from multiple kinds of sources, including small local banks, large national institutions, and online lenders.
As you consider financing proposals, it can be helpful to use a business loan calculator to estimate the monthly payments for different options. It’s also 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 loan 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 require several weeks in others.
Tips for Improving Your Loan Approval Chances
Lenders generally want to see evidence of your business’s stability as well as its ability to repay the loan. Taking steps to strengthen your business’s financial profile before you apply might help you increase your chances of securing a loan. Here are some steps to think about trying:
• Ensure that you have a realistic business plan with detailed financial projections.
• Work to build your business and personal credit scores by paying down your current balances and making timely payments.
• If you have collateral available, consider offering it as security to potentially bolster your application’s chance for approval with certain Louisiana business loans.
Other Funding Options for Louisiana Small Businesses
If a traditional loan isn’t the right fit for your funding needs, there are other possible ways to fund your business. Louisiana’s entrepreneurial ecosystem offers several alternative paths to obtain capital. One of these options may align better with your business’s specific stage of growth or industry.
Small business grants are generally a highly sought-after option because they don’t require repayment. The State Trade Expansion Program (STEP), for instance, provides reimbursements for eligible companies that are selling to foreign markets. You can also search national databases like Grants.gov for federal programs relevant to your industry.
Crowdfunding may be another viable route, allowing your business to raise smaller amounts of capital online from a broad base of supporters.
Additional Business Resources in Louisiana
Success in business often takes more than just capital. It requires expert guidance and a supportive community. Louisiana has a robust network of resources designed to help small business owners navigate challenges. The Louisiana Small Business Development Center (LSBDC) is a significant resource, offering no-cost advising at locations across the state. And Louisiana’s Hudson Initiative can help small businesses gain greater access to state purchasing and contracting opportunities.
In terms of mentorship, local SCORE chapters connect entrepreneurs with experienced business leaders who volunteer their time. Additionally, the Small and Emerging Business Development (SEBD) program provides managerial and technical assistance to certified small businesses. Engaging with your local Chamber of Commerce may also provide valuable networking opportunities.
The Takeaway
Securing a Louisiana small business loan can be the factor that allows your company to expand and thrive. While the process involves careful planning, it’s an important step in your company’s development. By defining your goals and utilizing state resources, you should ultimately 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 Louisiana?
To apply for a Louisiana business loan, start by defining your funding needs and checking your credit scores. Gathering essential documents like your business plan, tax returns, and bank statements will help you prepare your loan application for submission. Finally, compare options from various lenders to find the best terms you can get for your Louisiana small business loan.
Can I get a startup business loan with no money?
This can be challenging, since most lenders require an owner’s investment. However, some SBA microloans that are designed for startups have lower capital requirements. Another possibility is to look for business grants, which provide funding that doesn’t generally need to be repaid.
How hard is it to get a small business loan in Louisiana?
The degree of difficulty generally depends on factors such as your business’s financial health, time in operation, and credit history. Traditional bank loans can have rigorous qualifications. Online lenders often offer more flexible requirements, making them a more accessible option for many Louisiana 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. However, some online lenders may be willing to approve applicants with scores in the low 600s. Bear in mind that higher scores can result in better approval odds and lower interest rates.
What can I use a Louisiana small business loan for?
You can use a small business loan for almost any legitimate business purpose. Common uses include buying equipment, purchasing inventory, funding marketing campaigns, or refinancing debt. However, you can’t spend small business loans on personal expenses.
Are there any small business grants available in Louisiana?
Yes, grants may be available from a variety of sources. The Louisiana Economic Development (LED) site can be a resource for finding state-level opportunities like the STEP grants. You can also search national databases such as Grants.gov for federal programs relevant to your industry.
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