Small Business Loans
Learn All About Small Business Loans in Massachusetts
Massachusetts is home to more than 756,000 small businesses, which make up 99.5% of all enterprises in the state. From the biotechnology hubs in Cambridge to the fishing fleets of Gloucester and the tourism centers on Cape Cod, these companies employ nearly 45% of the state’s workforce.
Whether you’re launching a startup in the Berkshires or expanding a manufacturing plant in Worcester, finding small business loans in Massachusetts is a key step in developing your business. Here’s what you need to know about securing financing for your company.
- Key Points
- • Among other products, MassDevelopment offers specialized equipment loans to help manufacturers and industrial businesses scale operations.
- • The Massachusetts Clean Energy Center (MassCEC) provides grants and other programs to startups in the cleantech sector.
- • The State Trade Expansion Program (STEP) grant program can help Massachusetts businesses expand into international markets.
- • Seasonal businesses, like hotels and restaurants on the Massachusetts coast, may benefit from lines of credit, which can help them cover revenue lulls.
- • The Massachusetts Small Business Development Center (MSBDC) offers no-cost, confidential advising to businesses throughout the state.
Popular Types of Small Business Loans in Massachusetts
Entrepreneurs in the Bay State benefit from a sophisticated financial ecosystem that includes both state-sponsored equity programs and traditional lending. The following sections outline the most common funding options available to business owners across Massachusetts.
Massachusetts Small Business Loan Programs
The state actively fosters economic growth through its quasi-public agency. Massachusetts Development Finance Agency (MassDevelopment), which has grown to be the state’s primary small business funding group. The agency provides working capital loans, equipment financing, and microloans, among a wide variety of products.
Term Loans
If you obtain a term loan, after approving you, the lender will provide you with an upfront lump sum of capital. Over a specified period of time (the term), you’ll need to make regular payments to repay the loan principal and interest, which is usually charged 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, a software company in Boston might use a term loan to build out a new office space.
Business Lines of Credit
Unlike a term loan, a business line of credit can give your company access to a revolving pool of funds that you can draw from as you need money, up to a predetermined limit. You pay interest only on the money you withdraw, and as you repay the balance, you replenish the pool of funds and can withdraw more again.
This kind of funding can be helpful for businesses that may have fluctuating needs and income. For example, a seasonal resort on Cape Cod could use a line of credit to manage payroll and inventory costs during the off-peak winter months.
Equipment Financing
If your business is in need of a specific physical asset, like machinery, vehicles, or technology, you may want to apply for equipment financing. A commercial fishing operation in New Bedford, for instance, could use an equipment financing loan to finance a new vessel, while a precision manufacturer in Lowell might use one to acquire CNC machines.
Since the equipment itself serves as collateral for the lender, equipment financing loans may be easier to obtain than unsecured loans. What’s more, they often come with more favorable terms, too.
SBA Loans
SBA loans are provided by private lenders, but they’re partially guaranteed by the U.S. Small Business Administration. This federal backing lowers risk for the lender, and as a result, the loan conditions may permit lower down payments and longer repayment terms than other types of loan. If you qualify, these Massachusetts business loans are available through many approved banks and credit unions.
Here are some types of SBA loans commonly used by 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.
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 Massachusetts
When your company is applying for Massachusetts small business loans, prospective lenders generally want you to provide them with an in-depth, easy-to-understand rundown of your business’s robust 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 Massachusetts.
Define Your Loan Purpose and Amount
Before reaching out to lenders, it’s wise to have a precise understanding of your company’s funding needs. You should be able to articulate exactly how much money is needed and how it will generate a return. A specific proposal, such as “$50,000 to upgrade our laboratory filtration systems improving data integrity, operating safety, and operational costs,” demonstrates strategic thinking and financial discipline.
Know Your Credit Score
When reviewing your Massachusetts 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: Many traditional banks 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 the importance of credit scores, it may be a good idea to review your credit reports before you apply so that you can spot any errors and have them fixed. Having this information will also let you be sure you fully understand your financial situation before you submit your application for a Massachusetts small business loan.
Gather Your Key Documents
Sending a prospective lender an application package that’s organized and complete can speed up the review process and demonstrate that you’re reliable and motivated. Requirements vary by lender, but you should usually 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
When you’re looking at Massachusetts 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 equipment loans, for instance. It’s also smart to compare options from multiple kinds of sources, including small local banks, large national institutions, and online lenders.
As you review financing proposals, it may 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
Once you’ve filled out the loan application form and gathered your supporting documentation, you should be ready to submit the application package. After 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
You might be able to increase your odds of securing a small business loan by taking steps to strengthen your business’s financial profile before you apply. Lenders typically want to see evidence of your company’s stability as well as its ability to repay the loan. Presenting a financially strong profile may help you secure the loan.
Here are a few steps to consider trying:
• Be sure that you’ve got a realistic business plan with detailed financial projections.
• Work to strengthen your business and your 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 Massachusetts business loans.
Other Funding Options for Massachusetts Small Businesses
If a traditional loan doesn’t seem to be the right fit, there are other ways you may be able to fund your business. Massachusetts’s entrepreneurial ecosystem offers several alternative paths for obtaining capital. One of these options may align better with your company’s specific stage of growth or industry.
Small business grants are a highly sought-after option because they don’t require repayment, and there are a number of grant programs in Massachusetts. For instance, the Massachusetts Technology Collaborative (MassTech) focuses on connecting businesses to federal grants, but also provides some specialized grants that may be relevant to technology companies involved in research and development, among others. The Massachusetts Clean Energy Center (MassCEC) offers a variety of grants and other programs to startups in the cleantech sector, while the State Trade Expansion Program (STEP) grant helps businesses expand into international markets. You may also be able to find grants by searching national databases like Grants.gov for federal programs relevant to your industry.
Crowdfunding is another potentially viable route, helping you raise smaller amounts of capital online from a broad base of supporters.
Additional Business Resources in Massachusetts
To succeed in business, you often need more than just capital, you need expert guidance and a supportive community. Fortunately, Massachusetts has a robust network of resources designed to help small business owners navigate challenges. The Massachusetts Small Business Development Center (MSBDC) is a significant resource that provides no-cost, confidential advising at regional offices throughout the state.
In terms of mentorship, local SCORE chapters connect entrepreneurs with experienced business leaders who volunteer their time. Additionally, the Center for Women & Enterprise (CWE) offers specialized training and counseling for women-owned businesses. Engaging with your local Chamber of Commerce can also provide valuable networking opportunities.
The Takeaway
Securing a Massachusetts small business loan can be the decisive factor that allows your company to expand and prosper. While the process can seem daunting, determination and focus can help you get through it. 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 Massachusetts?
When you’re applying for a Massachusetts business loan, start by defining your funding needs and checking your credit scores. Next, gather essential documents like your business plan, tax returns, and bank statements to help you complete your loan application. Finally, compare options from various lenders to find the best terms you can get for your Massachusetts 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 designed for startups have lower capital requirements. Another possibility is to look for business grants, which provide funding that doesn’t need to be repaid.
How hard is it to get a small business loan in Massachusetts?
The degree of difficulty depends on factors such as your business’s financial health, time in operation, and credit history. Traditional bank loans often have strict requirements, but online lenders may be more flexible in their requirements, making them a more accessible option for many Massachusetts businesses.
What is the easiest type of business loan to get approved for?
Loans secured by collateral, such as equipment loans, 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 Massachusetts 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. However, you cannot use the loan for personal expenses.
Are there any small business grants available in Massachusetts?
Yes, grants are available from a variety of sources. The Massachusetts Clean Energy Center, for instance, offers grants to cleantech companies. You can also search national databases like Grants.gov for federal programs relevant to your industry.
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