More than 78,000 small businesses are located in North Dakota, and they account for 98.8% of all enterprises in the state. From the energy fields in the west to the agricultural plains of the Red River Valley, these companies employ nearly 58% of the state’s private workforce.
Whether you’re launching a tech venture in Fargo or expanding a ranch outside Bismarck, finding small business loans in North Dakota can be a key step in your business’s development. Here’s what you need to know about securing financing for your company.
Entrepreneurs in the Peace Garden State can benefit from a unique financial ecosystem centered around the state-owned Bank of North Dakota. The following sections outline the most common funding options available to business owners in North Dakota.
The state encourages economic growth through the Bank of North Dakota (BND). BND manages programs like the PACE (Partnership in Assisting Community Expansion) program, which works with local lenders to buy down interest rates for businesses creating new jobs.
Additionally, the North Dakota Development Fund offers gap financing through direct loans or equity investments to help “primary sector” businesses—those that bring new wealth into the state—complete their funding packages. And the nonprofit Lewis & Clark Development Group manages small business programs like the North Dakota Opportunity Fund to support small businesses expanding and creating jobs through a lender loan participation program.
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 manufacturing plant in Grand Forks might use a term loan to expand its assembly line.
In contrast to a term loan, a business line of credit lets you access a pool of funds that you can draw from as you need, up to a limit predetermined by your lender. 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 periodic lulls or uneven cash flow. For instance, a construction firm in Minot could use a line of credit to purchase materials before client payments arrive.
If your business requires a specific physical asset, like machinery, vehicles, or technology, you might be interested in equipment financing. An oil field service company in Williston could use this to finance a new drilling rig, for example, while a farmer near Valley City might use it to acquire a new tractor.
Because the equipment itself acts as collateral for the loan, equipment financing loans can be easier to obtain than unsecured loans. Additionally, they may come with more favorable terms.
Although SBA loans are issued by approved private lenders, they’re 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 Dakota 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.
You can use an SBA loan calculator to help you estimate what your loan costs might be for different kinds of SBA funding.
Recommended: Small Business Financing Guide
When you’re applying for North Dakota small business loans, prospective lenders typically want you to show them 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 North Dakota.
Before you start contacting lenders, it’s a good idea to have a precise understanding of your funding needs. You should be able to articulate exactly how much money your company needs and how you’ll use it to generate a return. A specific proposal, such as “$50,000 to upgrade our grain storage facilities, reducing waste and spoilage by 18%” demonstrates strategic financial thinking.
When they’re reviewing your business loan application, prospective lenders tend to pay particular attention to your credit profile, and they’ll likely scrutinize your personal credit scores. Traditional banks often require a credit score for a business loan in the range of 680 or higher. Other lenders, like online banks, might be willing to consider slightly lower scores.
Because of your scores’ importance, it can be a good idea to review your credit reports before you apply. That way you can spot any inaccuracies and have them corrected — and you can be sure you fully understand your financial situation before you submit your application for a North Dakota business loan.
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 differ among lenders, 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)
When you’re considering North Dakota small business loans, it’s important to shop around to find the funding that best suits your needs, since different banks can offer very different options for the same kind of loan. You may also benefit by comparing options from multiple kinds of sources, including small local banks, large national institutions, and online lenders.
As you evaluate financing proposals, it can be helpful to use a business loan calculator to estimate the monthly payments for different options. It can also be a good idea to look closely at the Annual Percentage Rate (APR) of each loan to understand its true cost.
After you’ve completed the application form and gathered your supporting documentation, you should be ready to submit the package to your lender. 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.
You may be able to boost your chances of securing a loan by taking steps to strengthen your business’s financial profile before you apply. Lenders typically look for evidence of your company’s stability and its ability to repay its debts. Presenting a financially strong, low-risk profile can be a good way to help win their confidence.
Here are some strategies to consider:
• Be sure you’ve got a realistic business plan that includes detailed financial projections.
• Work to strengthen 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 Dakota business loans.
If a traditional loan doesn’t seem to be a good fit, there may be other ways to fund your business. North Dakota’s entrepreneurial ecosystem offers several alternative paths to capital, and one of these options may align better with your company’s specific stage of growth or industry.
Small business grants are highly sought after because they don’t require repayment, and there are options available to entrepreneurs in North Dakota. Innovate ND offers voucher-based reimbursements to startups for market research and product validation, while the Agricultural Products Utilization Commission (APUC) provides grants for developing new agricultural products.
National databases like Grants.gov can also be a source for federal programs relevant to your industry.
Crowdfunding can be another viable route. A crowdfunding platform may help you raise smaller amounts of capital from a broad base of online supporters.
Success in business often requires more than just capital. It also takes guidance and a supportive community. Fortunately, North Dakota has a network of resources designed to help small business owners navigate their challenges. The North Dakota Small Business Development Center (ND SBDC) is a notable resource, offering no-cost advising to businesses statewide.
As for mentorship, local SCORE chapters can connect entrepreneurs with experienced business leaders who volunteer their time. Getting involved with your local Chamber of Commerce can also provide valuable networking opportunities.
Securing a North Dakota small business loan can be the deciding factor that allows your company to expand and thrive. While the process can seem daunting, by defining your goals and utilizing the available resources, you should ultimately be able to find the right financing solution for your company.
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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Most North Dakota state-sponsored loans originate with a local lender rather than with the state directly. Once you’ve defined your project and needs, you can start the loan process with your local bank or credit union to discuss your options. That institution will then work with the Bank of North Dakota (BND) to apply for participation loans on your behalf.
It is challenging, as 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.
The degree of difficulty may depend on your business’s financial health, time in operation, and credit history. However, the Bank of North Dakota’s participation programs can make capital more accessible than it might be in other states by reducing risk for local banks.
Loans that are 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 typically have less stringent requirements, but may cost more in interest and other fees.
Credit score requirements differ, 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. Higher scores generally lead to better approval odds and lower interest rates.
You can use a small business loan for almost any legitimate business purpose — but not for personal expenses. Some common uses are purchasing inventory, buying equipment, funding marketing campaigns, or refinancing debt.
Yes, grants are available from a variety of sources. Innovate ND is a resource for startups seeking funding for market research and validation. Agricultural businesses can explore the APUC grant program. You can also search national databases like Grants.gov for federal programs relevant to your industry.
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