Small Business Loans
Learn All About Small Business Loans in North Carolina
North Carolina is the home of 1.1 million small businesses, which account for 99.6% of all enterprises in the state. From the banking capital of Charlotte and the research hubs of the Triangle to the furniture factories of the Triad, these companies employ almost 45% of the state’s workforce.
Whether you’re launching a biotech venture in Durham or expanding your family’s sweet potato farm in Eastern North Carolina, finding small business loans in North Carolina can be a key step in your business’s development. Here’s what you need to know about securing financing for your company.
- Key Points
- • The NC Rural Center offers loan participation programs to reduce risk for private lenders so they can provide loans to businesses that might not otherwise qualify.
- • The Western Women’s Business Center (WWBC) provides one-on-one counseling and help finding funding to women entrepreneurs in Western North Carolina.
- • The Carolina Small Business Development Fund (CSBDF) provides flexible loans and business counseling to North Carolina entrepreneurs,
- • The North Carolina Biotechnology Center (NCBiotech) provides specialized research loans to startups in the life sciences sector to bridge gaps in venture funding.
- • Seasonal tourism businesses in the Outer Banks frequently rely on lines of credit to manage cash flow during the winter off-season.
Popular Types of Small Business Loans in North Carolina
Entrepreneurs in the Tar Heel State are able to take advantage of a diverse financial ecosystem that supports everything from high-tech research to traditional agriculture. The following sections describe the most common funding options available to business owners across North Carolina.
North Carolina Small Business Loan Programs
The state encourages economic growth through nonprofit and state-backed organizations. The nonprofit Carolina Small Business Development Fund offers a variety of flexible loan types to entrepreneurs, as well as counseling, while NC Rural Center administers federal State Small Business Credit Initiative (SSBCI) funds, partnering with banks to offer loan participation that lowers interest rates and collateral requirements for small businesses.
Term Loans
A term loan can provide a small business with an upfront lump sum of capital. The borrower then repays the principal, along with interest (which is usually charged at a fixed rate), in regular installments over a specific period of time. Having a predictable repayment structure can be useful as you budget into the future, and because the funds come in a lump sum, such loans can be well-suited to funding large one-time investments. For example, a furniture manufacturer in High Point might use a term loan to upgrade its assembly line equipment.
Business Lines of Credit
Unlike a term loan, a business line of credit lets your company access a pool of funds that you can draw from as you need money, up to a limit predetermined by your lender. You pay interest only on the money you withdraw, and as you repay the funds, you replenish the pool and can withdraw more again.
This kind of funding can be helpful for businesses that have seasonal or otherwise fluctuating needs and income. A surf shop in Nags Head might use a line of credit to purchase inventory ahead of the summer tourist rush.
Equipment Financing
If your company needs to purchase a particular physical asset, like machinery, vehicles, or technology, then you might want to apply for equipment financing. A textile mill in Burlington could use an equipment financing loan to pay for new weaving machines, while a poultry farmer in Mount Olive might use one to acquire automated feeding systems.
Since the equipment itself acts as collateral, reducing risk for the lender, these loans may be easier to obtain and often come with more favorable conditions than unsecured loans.
Small Business Administration (SBA) Loans
Although they’re issued by approved private lenders, SBA loans are partially guaranteed by the U.S. Small Business Administration. This backing reduces risk for the lender, so the loan conditions may permit lower down payments and longer repayment terms. If you qualify, these North Carolina business loans are available through many approved banks and credit unions.
Below are the three types of SBA loans that may be the most useful for small businesses.
• The SBA 7(a) loan is extremely 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 intended 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 potential loan costs for different kinds of SBA funding.
Recommended: Small Business Financing Guide
How to Apply for a Small Business Loan in North Carolina
When you’re applying for North Carolina small business loans, lenders generally want you to present them with a clear, in-depth 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 North Carolina.
Define Your Loan Purpose and Amount
Before you start contacting lenders, you’ll want to have a precise understanding of your funding needs. You should be able to articulate exactly how much money your company needs and how it will generate a return. A specific proposal, such as “$75,000 to expand our craft brewery’s fermentation capacity and increase output by 20%” demonstrates your strategic financial thinking.
Know Your Credit Score
Your credit profile will likely be one of the first factors that a lender will review when considering your loan application. Your personal credit scores will probably be scrutinized, 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 this, it’s wise to review your reports before you apply in order to find any errors and have them corrected. This also helps you be sure you fully understand your financial situation before you submit an application for a North Carolina small business loan.
Gather Your Key Documents
Ensuring that your application package is organized and complete can speed up the review process as well as signal to your potential lender that you’re reliable and motivated. While requirements vary, you should generally be prepared to produce the following:
• Credit report
• Income statement
• Bank statements
• Budget
• Income tax returns (both business and personal)
• Business plan
• If relevant, collateral valuation and supporting documents (which may include titles, deeds, or invoices)
Compare Lenders and Loan Offers
When you’re considering North Carolina small business loans, it’s important to shop around to find the funding that best suits your needs. That’s because different banks can offer very different options on the same kind of funding. It’s also a good idea to compare options from multiple kinds of sources, including small local banks, large national institutions, and online lenders.
As you evaluate 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 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 it may require several weeks in others.
Tips for Improving Your Loan Approval Chances
You may be able to boost your odds of securing a loan by taking steps to strengthen your business’s financial profile before you apply. Lenders typically look for evidence of the company’s stability and its ability to repay its debts, so presenting a financially strong, low-risk profile can be a good way to win a lender’s confidence.
Here are some strategies to try:
• Be sure you’ve got a business plan that’s realistic and includes detailed financial projections.
• Work on your personal and business 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 North Carolina business loans.
Other Funding Options for North Carolina Small Businesses
If a traditional loan isn’t the right fit for your business’s needs, there may be other ways to fund your company. North Carolina’s entrepreneurial ecosystem offers several alternative pathways to capital. One or more of these options may align better with your business’s specific stage of growth or industry.
Small business grants are highly sought after because they don’t have to be repaid, and there are multiple options available in North Carolina. For instance, North Carolina Innovative Development for Economic Advancement (NC IDEA) offers highly competitive grants to scalable startups and early-stage companies, while the North Carolina Biotechnology Center (NCBiotech) provides funding for life science innovation. Searching national databases like Grants.gov for federal programs relevant to your industry can also turn up opportunities.
Crowdfunding is another potential route, allowing you to raise smaller amounts of capital online from a broad base of supporters.
Additional Business Resources in North Carolina
To succeed in business, you usually need more than just capital. You’ll also need experienced guidance and a strong, supportive business community. Fortunately, North Carolina has a robust network of resources to help small business owners navigate typical challenges. The Small Business and Technology Development Center (SBTDC) is a prominent resource, offering no-cost advising in locations across the state.
Additionally, the Western Women’s Business Center (WWBC) offers one-on-one counseling and help finding funding to women entrepreneurs in Western North Carolina.
For mentorship, local SCORE chapters connect entrepreneurs with experienced business leaders who volunteer their time. Additionally, the Council for Entrepreneurial Development (CED) connects tech and biotech entrepreneurs with training and peer support. Getting involved with your local Chamber of Commerce can also provide you with valuable networking opportunities.
The Takeaway
Securing a North Carolina small business loan can be the deciding factor that allows your company to expand and thrive. While the process can appear daunting, by defining your goals clearly and taking advantage of the available 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 North Carolina?
To apply for a North Carolina business loan, start by defining your specific funding needs and checking your credit scores. Then gather essential documents like your business plan, tax returns, and bank statements so you can complete and submit your application. Finally, compare options from various lenders to find the best terms available for your North Carolina small business loan.
Can I get a startup business loan with no money?
Obtaining a startup business loan with no money can be challenging, since most lenders require an owner’s investment. However, some SBA microloans are designed for startups and may be easier to get. Another possibility is to research business grants, which provide funding that doesn’t require repayment.
How hard is it to get a small business loan in North Carolina?
The degree of difficulty depends in large part on your business’s financial health, time in operation, and credit history. Traditional bank loans can be difficult to qualify for, but online lenders often have more flexible requirements.
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 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?
Credit score requirements can differ, but for traditional bank and SBA loans, a personal credit score of 680 or higher is frequently preferred. However, some online lenders may approve applicants with scores in the low 600s. Bear in mind that higher scores generally lead to better approval odds and lower interest rates.
What can I use a North Carolina small business loan for?
You can generally 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 North Carolina?
Yes, grants are available from a variety of sources. For example, NC IDEA and the NCBiotech both offer grants to North Carolina entrepreneurs. You can also search national databases like Grants.gov for federal programs relevant to your industry.
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