There are six main steps to getting a business loan in North Carolina:

1. Learn what lenders look for.

2. Decide what type of financing you need.

3. Find out how to get approved.

4. Gather documentation.

5. Find a lender.

6. Fill out the application.

This article explores what it takes to get a business loan in the Tar Heel State and how Nav can help.

1. Learn What Lenders Look for in North Carolina Small Businesses

If you’re a small business owner in North Carolina looking to obtain a small business loan, it’s important to know what lenders are looking for when considering your application. While different lenders may have slightly different criteria, there are several key factors that most lenders will take into account when evaluating your business and deciding whether to approve your loan application.

Credit score

Your personal and business credit scores are important factors that lenders will consider when evaluating your loan application. A higher credit score generally indicates that you have a strong history of paying your debts on time and managing your finances responsibly, which can make you a more attractive candidate for a loan.

Financial history

Lenders will also look at your business’s financial history, including your revenue, cash flow, and profitability. They want to see that your business has a consistent track record of generating revenue and managing its finances effectively.

Collateral

In many cases, lenders will require collateral to secure the loan. Collateral can take many forms, such as equipment, real estate, or accounts receivable. Lenders want to know that they can recoup their investment if you default on the loan.

Business plan

A well-written business plan can help demonstrate to lenders that you have a clear understanding of your business and its potential for success. Your plan should outline your goals, target market, competition, and financial projections.

Industry experience

Lenders may also consider your industry experience and expertise when evaluating your loan application. They want to see that you have a strong understanding of your industry and a track record of success.

Purpose of loan

Finally, lenders will want to know how you plan to use the funds from the loan. They want to see that the funds will be used for a specific purpose that will help your business grow and succeed.

2. Decide What Type of Loan or Financing You Need

As a small business owner in North Carolina, it’s important to be familiar with the types of financing options that are available to help you meet your business needs. Some of the loan options that you may want to consider include:

Term loans

Term loans can be offered by banks, credit unions, or other financial institutions and allow borrowers to pay them back over a specific period of time. The terms and interest rates will vary based on the lender and the type of loan you are applying for. Banks often require collateral and a strong credit history to secure a loan.

Alternative lenders

Alternative lenders, such as online lenders, may be a good option for small businesses that have difficulty qualifying for traditional loans. These lenders often have less stringent requirements and can provide funding quickly. However, they may also charge higher interest rates and fees.

Grants

Small business grants are another option to consider. These are typically offered by government agencies or private organizations and can provide funding for specific projects or initiatives. However, grants can be highly competitive and may require extensive documentation and reporting.

Lines of credit for North Carolina Small Businesses

Another financing option that small businesses in North Carolina may want to consider is a line of credit. A line of credit is a flexible form of financing that allows you to borrow money as needed, up to a predetermined credit limit. You can use the funds for a variety of business purposes, such as inventory purchases, working capital, and unexpected expenses.

The advantage of a line of credit is that you only pay interest on the amount of money that you borrow, and you can access the funds quickly and easily. You can draw on the line of credit as needed during the draw period (up to the credit limit) and repay the funds during the repayment period while only paying interest on what you have borrowed. This makes a line of credit a good option for businesses that have irregular cash flow or that need quick access to funds.

To obtain a line of credit, you’ll need to apply with a lender and demonstrate that you have a strong credit history and financial track record. The lender will typically require collateral, such as inventory or accounts receivable, to secure the line of credit.

Lines of credit are offered by a variety of lenders, including banks, credit unions, and alternative lenders. The terms and interest rates will vary based on the lender and your creditworthiness and other factors.

Small Business Administration (SBA) loans

SBA loans are backed by the U.S. government and offer low rates and favorable repayment terms. They can be used for a variety of purposes, including working capital, equipment purchases, and real estate investments. The loan amount can range from less than $50,000 up to $5 million, but the application process can be lengthy and difficult to qualify for.

3. Find Out How to Get Approved for a Small Business Loan in North Carolina

When applying for a small business loan in North Carolina, it’s important to know how to put forward the best possible application. Here are some tips to help increase your chances of getting approved:

Check your credit report 

Your personal and business credit scores often play a big role in your ability to secure financing. Before applying for a loan, check your credit reports and address any errors or negative marks.

Gather financial documents 

Lenders will often want to see financial records like tax returns and bank statements to verify your revenue and cash flow. Make sure you have these documents prepared and organized before applying.

Research lenders

Different lenders have different requirements and loan products. Research and compare lenders to find the ones that are most likely to approve your loan application.

Consider alternative lenders

If you have a low credit score or don’t meet traditional bank requirements, consider alternative lenders. Online lenders and community development financial institutions (CDFIs) may be more willing to work with small businesses in North Carolina.

Be prepared to provide collateral

Depending on the type of loan you’re seeking, lenders may require collateral to secure the loan. Collateral could include assets such as equipment, real estate, or accounts receivable, and usually equals the value of your loan amount.

By following these tips and being prepared, you can increase your chances of getting approved for a small business loan in North Carolina. Remember to only borrow what you can afford to repay and to read the terms and conditions of any loan offer carefully.

4. Choose a Lender

Once you have determined the type of loan or financing that you need, the next step is to choose a lender. In North Carolina, there are various options to consider when it comes to choosing a lender, including banks, credit unions, and online lenders. It’s important to shop around and compare offers from different lenders to find the best option for your business.

Direct lenders

Direct lenders make loans directly, and they include traditional financial institutions such as banks and credit unions. If you have an established relationship with your bank or credit union, you may want to start your search with them. They may have more favorable rates or terms since they already have a history with you and your business.

Online lenders

Online lenders have become increasingly popular in recent years, particularly for small business loans. They offer convenience and often have quicker turnaround times compared to traditional lenders. However, it’s important to do your due diligence and research online lenders thoroughly to ensure they are reputable and trustworthy.

Lending marketplaces

Another option to consider is lending marketplaces that connect you with multiple lenders based on your qualifications. By entering your business’s information, you can receive options from multiple lenders, giving you a better picture of the right financing for your business. These marketplaces exist online, so the application process is typically quicker than traditional lending scenarios.

When choosing a lender, it’s important to consider not just interest rates and terms, but also their reputation and customer service. Take the time to compare lenders and read reviews before making a decision.

5. Gather Documents for Your North Carolina Small Business Loan

When applying for a small business loan in North Carolina, lenders may require documentation to verify your financial standing and ability to repay the loan. The exact documents needed will depend on the type of loan and the lender’s requirements, but here are some common documents you may need to gather:

Business bank account statements

Provide statements for your business bank accounts to show your cash flow and financial stability. It will be difficult to secure a business loan without a business checking account.

Tax returns and supporting documents

Lenders may require your personal and business tax returns, along with any supporting documents such as W-2s and 1099s.

Licenses and registrations

Provide documentation of any applicable licenses and registrations required for your business to operate in North Carolina.

Financial documents

Lenders may ask for additional financial documents such as a profit and loss statement, a balance statement, proof of credit card sales, and accounts receivable due to you.

Legal contracts

If relevant, you may have to provide any legal contracts such as franchise agreements, incorporation documents, or leasing agreements.

In addition to these documents, some lenders may require a business forecast, updated business plan, or documentation of underserved representation. It’s important to review the lender’s requirements and provide all requested documentation to increase your chances of approval.

Remember, lenders want to see evidence that your business is financially stable and has the ability to repay the loan. By gathering the necessary documents and being prepared, you can simplify the loan application process and increase your chances of success.

6. Fill Out the Application

After choosing the loan you plan to apply for and making sure you have all the documentation you need in place, it’s time to fill out the application. This can typically be done online or in person at a bank or lending institution. Be prepared to spend some time on this step, as you’ll want to ensure that all information provided is accurate and complete.

After submitting your application, you can expect to wait anywhere from a few minutesto several weeks for a response from the lender, depending on the type of loan you applied for and which lender you applied with. If the lender requests additional documentation, it’s important to respond promptly to avoid any delays in the application process.

Remember, the lender is often looking for a solid credit history, collateral, and evidence that you can successfully service debt. If you’re struggling to secure a loan due to a lack of funds, a poor credit history, or no collateral, don’t despair. There are still options available to you, such as invoice factoring, business cash advances, crowdfunding, and microloans. Additionally, building a good credit profile, separating business checking account, and building a reliable payment history can all help you establish creditworthiness and increase your chances of securing a loan in the future.

How Nav Helps Small Businesses Get Loans

As a North Carolina small business owner, you may be wondering how to navigate the complex world of business loans. This is where Nav comes in to help. Nav is a financial health platform that provides resources and tools to help small business owners get access to funding.

Nav helps small business owners find the right lenders and loan products for their needs. By entering your business’s details, you’ll be able to see what you can qualify for before you apply. This can save you time and energy in your search for the right lenders.

Nav is a valuable resource for small business owners in North Carolina who are looking to secure funding for their business. By providing credit monitoring, loan options, educational resources, and business credit reporting, Nav can help you navigate the loan application process and improve your chances of getting approved for the financing you need for your business to thrive.

How a Small Business Loan Can Help Your North Carolina Business

Small business loans are a great tool to start, maintain, or expand your business in North Carolina. Whether you’re looking to purchase new equipment, hire more employees, or grow your product line, a small business loan can help you achieve your goals.