Small Business Loans
Learn All About Small Business Loans in Ohio
Ohio is home to approximately 1.1 million small businesses, which account for 99.6% of all enterprises in the state. From the manufacturing and industrial corridors of Cleveland and Dayton to the logistics hub of Columbus and the rich agricultural lands of the rural counties, these companies employ almost 44% of the state’s workforce.
Whether you’re launching a tech startup in Cincinnati or expanding a family farm in the Hocking Hills, finding small business loans in Ohio can be a key step in your company’s development. Here’s what you need to know about securing financing for your business.
- Key Points
- • The Ohio 166 Direct Loan Program provides low-interest loans specifically for purchasing real estate and fixed assets like heavy machinery.
- • The Collateral Enhancement Program (CEP) 2.0 utilizes federal State Small Business Credit Initiative (SSBCI) funds to pledge cash deposits to lenders, helping businesses with insufficient assets secure loans.
- • Ag-LINK offers significant interest rate reductions to farmers and agribusinesses to help cover the upfront costs of feed, seed, and fertilizer.
- • Certified Minority Business Enterprises (MBEs) can access low-interest financing for machinery and construction through the Minority Business Direct Loan Program.
- • Manufacturing companies frequently leverage equipment financing to acquire the robotics and tooling needed to support the state’s automotive and aerospace sectors.
Popular Types of Small Business Loans in Ohio
Entrepreneurs in the Buckeye State can benefit from a financial ecosystem that blends strong industrial support with targeted agricultural and minority business assistance. The sections that follow outline the most common funding options available to business owners across Ohio.
Ohio Small Business Loan Programs
The state encourages economic growth through the Ohio Department of Development, which provides programs like the Collateral Enhancement Program 2.0. This program partners with local banks to provide cash collateral accounts, enabling lenders to approve loans for businesses that might otherwise be rejected due to a lack of assets. The Ohio Statewide Development Corporation provides the 166 Direct Loan Program, which offers low-interest loans of up to $1 million to help businesses purchase land, buildings, and equipment, covering up to 40% of the project cost.
Additionally, certified Minority Business Enterprises (MBEs) can access low-interest financing for machinery and construction through the Minority Business Direct Loan Program. And the nonprofit Economic and Community Development Institute (ECDI) acts as a microlender, providing loans and training to startups.
Term Loans
With a term loan, a lender provides 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), over a defined period of time. Having a predictable repayment structure can be useful as you budget, and because the funds come in a lump sum, such loans may be well-suited to funding large one-time investments. For example, an auto parts supplier in Toledo might use a term loan to expand its production facility.
Business Lines of Credit
In contrast to a term loan, a business line of credit can let you access a pool of funds that you can draw from as you need, up to a limit set by the 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 you to withdraw again.
Lines of credit can be helpful for businesses that have seasonal lulls or uneven cash flow. For instance, a landscaping company in Columbus could use a line of credit to purchase materials in the spring before client payments start coming in.
Equipment Financing
If your business needs a specific physical asset, like machinery, vehicles, or technology, you might want to apply for equipment financing. A corn farmer in Mercer County could use an equipment financing loan to buy a new combine, for example, while a brewery in Akron might use one to acquire new fermentation tanks.
Since the equipment itself acts 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 loans may permit lower down payments and longer repayment terms. If you qualify, these Ohio 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 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 Ohio
When you’re applying for Ohio small business loans, prospective lenders generally want you to present them with 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 Ohio.
Define Your Loan Purpose and Amount
Before you reach out to potential lenders, it’s smart to have a precise understanding of your funding needs. Ideally, you would be able to articulate exactly how much money your company needs and how it would generate a return. A specific proposal, such as “$75,000 to automate our assembly line, which we project will increase output by 25% annually,” demonstrates strategic financial thinking.
Know Your Credit Score
Lenders will generally pay particular attention to your credit profile when reviewing your loan application, 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, such as online banks, may be willing to consider slightly lower scores.
Because these scores are so important, it can be a good idea to review your credit reports before you apply. That way, you should be able to spot any inaccuracies and have them corrected — and be sure you fully understand your financial situation before you submit your application for an Ohio small business loan.
Gather Your Key Documents
Submitting an organized, complete application package can speed up the review process and show a potential lender that you’re reliable and motivated. While requirements vary by lender, you should generally 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
Shopping around can go a long way toward helping you find the financing that best fits your business’s needs, since different banks may offer very different options for the same kind of loan. It’s also smart to compare offers from multiple kinds of sources, including local community banks, large national institutions, and online lenders.
As you evaluate proposals, consider using a business loan calculator to help you estimate the monthly payments for your different options. It’s also worth looking 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 application form and organized your supporting documents, you’re ready to submit the application package. After your lender has it, you’ll need to wait for its 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 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 the company’s stability and its ability to repay its debts. Presenting a financially strong, low-risk profile can be a good way to win a lender’s confidence.
Here are some strategies to try:
• Make sure you’ve got a realistic business plan that 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 Ohio business loans.
Other Funding Options for Ohio Small Businesses
If a traditional loan isn’t a good fit for your company’s needs, there may be other ways to fund your business. Ohio’s entrepreneurial ecosystem offers several alternative paths to acquiring capital, and one or more 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 a variety of grants available in Ohio. For instance, the JobsOhio Small Business Grant provides up to $50,000 to help eligible small businesses pay for approved costs, like training, equipment, and facility acquisition or upgrades. Additionally, the Ohio TechCred program reimburses businesses for employee technology training. National databases like Grants.gov can also be a good source for federal programs relevant to your industry.
Additional Business Resources in Ohio
Success in business tends to require more than just capital. It generally takes guidance and a strong, supportive community. Fortunately, Ohio has a network of resources designed to help small business owners navigate their challenges. The Ohio Small Business Development Center (SBDC) is a prominent resource, offering no-cost advising at regional centers statewide.
For mentorship,local SCORE chapters connect entrepreneurs with experienced business leaders who volunteer their time. Additionally, Ohio’s Minority Business Assistance Centers (MBAC) provide specialized counseling to help owners of small, emerging, and historically under-resourced businesses. Engaging with your local Chamber of Commerce can also provide valuable networking opportunities.
The Takeaway
Securing an Ohio small business loan can be the deciding factor that allows your company to expand. While the process may seem daunting, by defining your goals clearly and utilizing the resources available to you, 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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FAQ
How do I get a small business loan in Ohio?
To apply for an Ohio 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 so you’ll be ready to submit your application. Finally, compare offers from various lenders to find the best available terms for your 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 will require an owner’s investment. However, some SBA microloans are intended for startups and may be easier to get. Another option is to research business grants, which provide funding that doesn’t need to be repaid.
How hard is it to get a small business loan in Ohio?
The difficulty of getting an Ohio 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 often more flexible, making them a more accessible option for many Ohio 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 than unsecured loans 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. Some online lenders may 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 an Ohio small business loan for?
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.
Are there any small business grants available in Ohio?
Yes, grants are available from a variety of sources. JobsOhio and the Ohio TechCred program both offer grant opportunities. You can also search national databases like Grants.gov for federal programs relevant to your industry.
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