Small Business Loans
Learn All About Small Business Loans in Mississippi
Almost 295,000 small businesses call Mississippi home and together they make up 99.3% of all enterprises in the state. From the agricultural heartland of the Delta to the manufacturing hubs in the Golden Triangle, these companies employ nearly half of the state’s workforce.
Whether you’re launching a catfish farm in Belzoni or expanding a logistics firm in Southaven, finding a Mississippi business loan is a key step in any company’s development. Here’s what you need to know about securing financing for your business.
- Key Points
- • The Mississippi Small Business Loan Guaranty Program helps small businesses secure financing by guaranteeing a portion of the loan with participating lenders.
- • The Minority Business Micro Loan Program offers direct financing up to $35,000 to businesses owned by socially and economically disadvantaged entrepreneurs.
- • InvestMS provides venture capital and equity investment matching for MIssissippi-based startups.
- • The Capital Access Contract Loan Program assists businesses that have been awarded public contracts but lack the upfront capital to begin work.
- • Agricultural producers frequently rely on equipment financing to acquire tractors and processing machinery essential for the state’s agribusiness sector.
Popular Types of Small Business Loans in Mississippi
Entrepreneurs in the Magnolia State benefit from a supportive network of state-sponsored initiatives and private lending options. The sections that follow outline the most common funding options available to business owners across Mississippi.
Mississippi Small Business Loan Programs
The state actively fosters economic growth through the Mississippi Development Authority (MDA). The MDA manages programs like the Small Business Loan Guaranty Program, which encourages lenders to fund small businesses by mitigating their risk and the Capital Access Contract Loan Program, which provides loans to businesses that have been awarded public contracts but lack capital to begin that work.
Additionally, the Minority Business Micro Loan Program provides essential capital to minority- and women-owned businesses that may face barriers to traditional credit.
Term Loans
A term loan can provide a small business with an upfront lump sum. 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. Having a fixed, predictable repayment structure can be useful as you budget, and because the funds come in a lump sum, such loans can be well-suited to funding large, one-time investments. For example, a restaurant in Jackson might use a term loan to renovate its kitchen.
Business Lines of Credit
Unlike a term loan, a business line of credit lets your business access a pool of funds that you can draw from whenever you need funding, up to a preset limit. Generally, you pay interest only on the money you actually withdraw, and as you repay the balance, you replenish the pool of funds so the money becomes available to withdraw again.
Lines of credit can be helpful for businesses that have fluctuating lulls or uneven cash flow. For instance, a seasonal tourism business in Biloxi could use a line of credit to manage inventory costs during the slow season.
Equipment Financing
If your business needs a specific physical asset, like machinery, vehicles, or technology, you might want to apply for equipment financing. A forestry company in the Pine Belt could use this kind of loan to finance a new skidder, while a construction firm in Tupelo might use equipment financing to acquire a new excavator.
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.
Small Business Administration (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 Mississippi 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 Mississippi
Applying for a Mississippi small business loan requires preparation and attention to detail. You’ll need to give prospective lenders 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 Mississippi.
Define Your Loan Purpose and Amount
Before you contact lenders, it’s a good idea to have a precise understanding of your company’s funding needs. You should be able to explain exactly how much money is needed and how it will generate a return.A specific proposal, such as “$50,000 to upgrade our irrigation systems, which we anticipate will increase yearly yield by 10%, “demonstrates strategic thinking and financial discipline.
Know Your Credit Score
When reviewing your Miississippi business loan application, prospective lenders are likely to 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 spot any errors and have them fixed. Additionally, your review can let you be sure you fully understand your financial situation before you submit your application for a Mississippi small business loan.
Gather Your Key Documents
Giving your prospective lender an application package that’s organized and complete can speed up the review process and show 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 considering Mississippi small business loans, shopping around can help you find the financing that best suits your company’s needs, since different banks may offer very different options on lines of credit, for instance. It’s also smart to compare offers from multiple kinds of sources, including small local banks, large national institutions, and online lenders.
As you consider financing proposals, you might want 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 can require several weeks in others.
Tips for Improving Your Loan Approval Chances
Lenders typically want to see evidence of your business’s ability to repay the loan and its stability. 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 strategies to try:
• Make sure you have a realistic business plan with detailed financial projections.
• Work on building 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 Mississippi business loans.
Other Funding Options for Mississippi Small Businesses
If a traditional loan isn’t the right fit for your business needs, there may be other ways to fund your business. Mississippi’s entrepreneurial ecosystem provides several possible alternative paths to funding. 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 you don’t have to pay them back. The Mississippi Development Authority can connect small businesses with grant opportunities when they are available, and the Mississippi Seed Fund offers a Proof of Concept grant for early-stage enterprises, as well as other programs. National databases like Grants.gov for federal programs relevant to your industry.
There may also be venture capital opportunities. InvestMS provides venture capital and equity investment matching for MIssissippi-based startups. And Innovate Mississippi supports tech startups by connecting them with an angel investment network and seed fund.
Crowdfunding can be another viable route, allowing you to raise smaller amounts of capital online from a broad base of supporters.
Additional Business Resources in Mississippi
Success in business can often require more than just capital: It also takes expert guidance and a strong business community. Fortunately, Mississippi has a network of resources designed to help small business owners navigate challenges. The Mississippi Small Business Development Center (MS-SBDC) is a significant resource, offering no-cost, confidential advising at locations across the state.
As for mentorship, local SCORE chapters connect entrepreneurs with experienced business leaders who volunteer their time. Additionally, Hope Credit Union acts as a Community Development Financial Institution (CDFI), co-sponsoring free mentorship programs for entrepreneurs. Engaging with your local Chamber of Commerce can also provide valuable networking opportunities.
The Takeaway
Securing a Mississippi small business loan can be the decisive factor that allows your company to expand. While the process involves careful planning, a committed entrepreneur can generally achieve it. By defining your goals and utilizing the resources available to you, you should be able to find a financing solution that will work for your company right now.
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 Mississippi?
To apply for a Mississippi business loan, 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 you’ll be ready to prepare and submit your loan application. Finally, compare offers from various lenders to find the best terms available for your Mississippi small business loan.
Can I get a startup business loan with no money?
This can be challenging to do because 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 Mississippi?
The degree of difficulty involved depends on factors like your business’s financial health, time in operation, and credit history. Traditional bank loans can have demanding requirements, but online lenders may be more flexible, making them a more accessible option for many Mississippi 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 lowers the lender’s risk. Short-term loans and invoice financing from online lenders also tend to have less stringent requirements.
What credit score do I need for a small business loan?
Requirements often 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 Mississippi small business loan for?
You can use a small business loan for almost any legitimate business purpose (but not for personal expenses). Common uses can include purchasing inventory, buying equipment, funding marketing campaigns, or refinancing debt.
Are there any small business grants available in Mississippi?
Yes, grants are available from a variety of sources. The Mississippi Development Authority can be a resource for finding opportunities. You can also search national databases like Grants.gov for federal programs relevant to your industry.
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