Small Business Loans
Learn All About Small Business Loans in Montana
In Montana, there are more than 141,000 small businesses, which make up approximately 99.2% of all enterprises in the state. From the farms in the east to the bustling tourism hubs near Glacier and Yellowstone, these companies employ more than 66% of the state’s workforce.
No matter whether you’re launching a fly-fishing guide service in Bozeman or expanding a ranching operation in Miles City, finding the right small business loans in Montana is a key step in developing your company. This guide will tell you what you need to know about scouting out and securing the right financing for your company.
- Key Points
- • The Montana State Small Business Credit Initiative (SSBCI) 2.0 uses federal funds to offer loan participation to local lenders, reducing their risk and making loans more accessible to small businesses.
- • The MicroBusiness Finance Program provides loans of up to $100,000 to companies with fewer than 10 employees and limited gross revenue.
- • The Indian Equity Fund offers grants to Native American business owners to help cover startup costs and expansion efforts.
- • Agricultural producers frequently utilize equipment financing to obtain tractors and other heavy machinery needed for farming.
- • Seasonal tourism businesses often rely on lines of credit to manage cash flow during the slower months.
Popular Types of Small Business Loans in Montana
Entrepreneurs in Big Sky Country may benefit from the mix of state-sponsored support and private lending options tailored to the state’s rural and resource-based economy. The following sections outline the most common funding options available to business owners across Montana.
Montana Small Business Loan Programs
The state actively fosters economic growth through the Montana Department of Commerce. The department manages the State Small Business Credit Initiative (SSBCI), which includes a loan participation program where the state purchases up to 50% of an eligible loan to help businesses secure the financing they need. Additionally, the MicroBusiness Finance Program partners with regional development corporations to provide capital to very small businesses, with the goal of creating and retaining jobs.
Term Loans
If you get a term loan, a lender provides you with an upfront lump sum. In return, over a specified period (the term), you make regular payments to repay the principal and the interest on it, 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 brewery in Missoula might use a term loan to purchase new fermentation tanks.
Business Lines of Credit
In contrast to 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 limit set by the lender. 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 have fluctuating needs and income. A fly-fishing outfitter in Kalispell could use a line of credit to purchase gear and supplies before the summer tourist season begins.
Equipment Financing
If you need to purchase a specific physical asset for your company, like machinery, vehicles, or technology, then you might want to apply for equipment financing. A construction firm in Billings could use this kind of loan to finance a new loader, for example, while a rancher in Dillon might use equipment financing to acquire a new cattle trailer.
Since the equipment serves as collateral for the loan, equipment financing loans may be easier to obtain and often come with more favorable conditions than unsecured loans.
Small Business Administration (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 Montana 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 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 Montana
When you’re applying for Montana small business loans, potential lenders generally want to see an in-depth, easy-to-understand rundown of your company’s 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 Montana.
Define Your Loan Purpose and Amount
Before you start contacting lenders, you need to have a precise understanding of your company’s funding needs. Ideally, you should be able to articulate exactly how much money you need and how it will generate a return. A specific proposal, such as “$50,000 to expand our greenhouse capacity, increasing our potential harvest by 20%” demonstrates strategic thinking and financial planning.
Know Your Credit Score
When reviewing your Montana 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 frequently 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.
Due to your scores’ importance, it’s a practical idea to review your credit reports before you apply so that you can find any errors and have them fixed. It can also help you be sure you fully understand your financial situation before you submit your application for a Montana small business loan.
Gather Your Key Documents
Handing in an organized and complete application package can expedite 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 looking at Montana small business loans, shopping around can help you find the financing that best suits your needs, since different banks can offer very different options. It’s also smart to compare offers from multiple kinds of sources, including small local banks, large national institutions, and online lenders.
As you evaluate 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 completed your application form and organized your supporting documents, you’re ready to submit your application package. After your lender has it in hand, all you have to do is wait for a 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 working to strengthen your business’s financial profile before you apply. Lenders typically want to see evidence of your business’s stability as well as its ability to repay the loan. Presenting a financially strong profile may help you win a lender’s confidence.
Here are some steps to think about trying:
• Be sure that you’ve got 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 Montana business loans.
Other Funding Options for Montana Small Businesses
If a traditional loan doesn’t feel like the right fit for your company, there are other ways you may be able to fund your business. Montana’s entrepreneurial ecosystem provides several alternative paths to obtaining capital. One or more of these options might align better with your specific stage of growth or industry.
Small business grants are a highly sought-after option because they don’t require you to repay the funds. For example, the Growth Through Agriculture (GTA) program offers both grants and loans to farming enterprises strengthening and diversifying products and processes while the Indian Equity Fund supports Native American entrepreneurs. Searching national databases like Grants.gov for federal programs relevant to your industry can also help you find opportunities.
Crowdfunding may be another viable route to funding, helping you raise smaller amounts of capital online from a broad base of supporters.
Additional Business Resources in Montana
To succeed with your business, you’ll generally need more than just capital. You’ll benefit from expert guidance and a helpful, supportive business community. Montana has a robust network of resources designed to help small business owners navigate challenges. The Montana Small Business Development Center (SBDC) is a major resource in the area, offering free advising at regional centers statewide.
In terms of mentorship, local SCORE chapters connect entrepreneurs with experienced business leaders who volunteer their time. Additionally, the nonprofit lender MoFi provides business consulting to its loan customers, who are typically entrepreneurs who may not qualify for bank financing. Getting involved with your local Chamber of Commerce can also help you find valuable networking opportunities.
The Takeaway
Securing a Montana small business loan could be the deciding factor that lets your company expand and thrive. While the process involves careful planning, with diligence a determined entrepreneur can succeed. By defining your goals and utilizing state resources, you should 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 Montana?
To apply for a Montana 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 prepare and submit your application.
Finally, compare offers from various lenders to find the best terms available for your Montana 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 option is to research business grants, which provide funding that doesn’t have to be repaid.
How hard is it to get a small business loan in Montana?
How difficult it will be to obtain a Montana business loan depends on your business’s financial health, time in operation, and credit history. Traditional bank loans can have strict requirements, but online lenders are frequently more flexible, making them a more accessible option for many Montana 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 risk for the lender. 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?
Credit score 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 approve applicants with scores in the low 600s. Bear in mind that higher scores can also result in better approval odds and lower interest rates.
What can I use a Montana small business loan for?
You can use a small business loan for almost any legitimate business purpose (but not for personal expenses). Common uses include purchasing inventory, buying equipment, funding marketing campaigns, or refinancing debt.
Are there any small business grants available in Montana?
Yes, grants are available from a variety of sources. The Montana Department of Commerce is an excellent resource for finding state-level opportunities like the Indian Equity Fund. You can also search national databases like Grants.gov for federal programs relevant to your industry.
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