New Jersey currently ranks 11th in the number of small businesses in the United States, with over 850,000 businesses located in the Garden State. That’s both good and bad. On one hand, New Jersey small business owners have a lot of resources available to them; on the other hand they face strong competition. To make your small business stand out, you may need more resources so you can invest in growing your business. And that often means access to small business loans.  

How a Small Business Loan Can Help Your New Jersey Business

Small business loans can help your business grow by allowing you to acquire or build a larger location or invest in automation or workers, expand your online presence, or even try out offering new products or services. 

You don’t want a great business opportunity to present itself and then find yourself scrambling to get financing to make it happen. Similarly, you wouldn’t want your business to fail because of a short term cash flow problem. 

Lining up business financing before you need it allows you to be more nimble when those opportunities or challenges arise. 

Types of Small Business Loans to Choose From

Whether you were ready to get a small business loan yesterday, or you aren’t even sure you need one at all, take the time to get familiar with what your small business loan options are. That way you can make an informed decision when it’s time to borrow. 

Here are the most popular types of financing used by small businesses: 

Lines of credit 

With a line of credit, you’re approved to borrow up to a certain amount, but you only use what you need when you need it making this an attractive choice for working capital needs. You’ll also only pay interest on the amount you have borrowed. This flexibility makes this a must-have type of financing for many small businesses. 

Term loans

When you know how much you need to borrow, and what you need to borrow for, a term loan is ideal. These loans offer a specific amount of financing and steady repayment terms that fluctuate little, if at all. 

Commercial real estate loans

If you’re ready to expand to a bricks and mortar location, or you want to expand the one you’re in now, a commercial real estate loan can help you make that happen. 

Business credit cards

A small business credit card can be ideal for short-term borrowing, especially if you choose a card with a low interest rate, or even one with a 0% APR offer. These cards are generally available to borrowers with good credit and sufficient income, and most are startup friendly. 

Microloans

If you’re a New Jersey business owner who has been stymied in your search for financing, or if you are starting a new business, you may want to investigate microloans. These loans are usually made through nonprofit Community Development Financial Institutions (CDFIs) and loan amounts are often small; less than $50,000 is common. Technical assistance is provided to help ensure the business can repay the loan. 

Crowdfunding

Crowdfunding allows entrepreneurs to raise money from individuals or investors. It’s startup friendly and credit checks are rare. There are several types of crowdfunding, including rewards-based (think Kickstarter), equity or investment-based and donation-based (think GoFundMe). You may also be able to get a loan using crowdfunding. Kiva.org is a great example.  Note that New Jersey has some specific investment crowdfunding regulations. You can learn more here. 

Equipment financing

Purchasing equipment can be expensive. Equipment financing, or leasing equipment, can preserve cash flow. In addition, there may be tax benefits associated with leasing equipment. 

Invoice factoring or financing

B2B businesses that invoice clients often find it takes days or weeks to get paid. Invoice financing or factoring can speed up payment, for a fee of course. 

Merchant cash advance

Businesses with strong credit or debit card sales, or online sales, can access merchant cash advances. This financing advances funds based on past transactions. Payments are taken daily or weekly from future sales. It’s an expensive type of financing, but it’s fast and good credit is rarely a prerequisite.

SBA Loans

Only Disaster Loans are made by the U.S. Small Business Administration. Other SBA loans are made by participating lenders and guaranteed in large part by the SBA. There are about a dozen different SBA loan programs. They offer favorable terms including low interest rates and predictable repayment terms. 

Small Business Loan Options for New Jersey

Business credit cards

Lines of credit

Term loans

Commercial real estate loans

Equipment financing or leasing

Invoice factoring or financing

SBA Loans

What it Takes to Get Approved for a Small Business Loan

When you apply for a small business loan, you can expect lenders to consider these four main eligibility factors:

1. Credit
2. Revenues
3. Time in business
4. Industry

Credit may mean personal credit, business credit, or both. Although most business owners would like to get away from personal credit checks, they are still quite common. However, some types of financing don’t typically require strong personal credit scores; in particular, invoice factoring, merchant cash advances, crowdfunding and vendor credit. In addition, online lenders often have lower minimum credit score requirements than banks. 

Business credit may also be checked. Make sure you know what’s on your business credit reports. Some lenders will check for red flags such as collection accounts or judgements, or for excessive UCC filings. 

Revenues are important because a business that is making money is in a better position to repay a loan. Be prepared to share copies of business bank account statements and/or link your business bank account for verification. Traditional lenders (including SBA lenders) may also want to see business tax returns or require business financial statements. 

As far as time in business goes, some lenders will only offer loans to businesses that have been around for at least 1-2 years. 

And each lender will have industries to which it will lend, and industries to which it won’t. Your industry will usually be identified with a SIC or NAICS code, and this may appear on your business credit reports. Double check that it is correct. 

How to Choose the Right Loan for Your New Jersey Small Business

So what is the best loan for your small business? Your New Jersey-based business has unique business needs, so what’s right for you may not be right for another. But here are some important factors to consider:

• How much financing do you need?
• How long will it take to pay it back? 
• How will you use the funds?
• Do you have good personal credit? Business credit?
• What are your annual revenues and average monthly revenues?
• What is your industry (SIC and NAICS codes)?
• Do you have collateral?

All of these questions will help inform the type of financing you choose, as well as the types of financing for which you can qualify.

Small Business Grant Options for New Jersey

If you don’t feel ready to take out a loan for your small business, or you can’t qualify for a loan, but you need capital, you may want to investigate small business grant programs. They are appealing as they offer funds that do not have to be paid back. 

However, grants are often difficult to find and to get. They also offer one-time funding, which means they are not the best option for someone who needs continuous cash flow needs or those who need funding by a certain date.

Start your search by looking at the New Jersey Economic Development Authority (NJEDA) grant and loan resource page. You’ll find information about a number of programs and initiatives available to businesses in New Jersey, including for resources for businesses impacted by the pandemic.

You can also search for federal grants at Grants.gov. Just be aware the federal government does not give away money to start a business. 

Private foundations and some businesses also offer small business grants. A site like Opengrants.io can help you search for grants. 

Additional Resources for Small Businesses in New Jersey

There is a robust network of organizations and government agencies ready to support the business community in New Jersey. 

Start at Business.nj.gov where you’ll find numerous business resources as well as information about federal and local opportunities and regulations in New Jersey.

The New Jersey Business Action Center of Small Business Advocacy offers tons of services ranging from helping you find programs your business is eligible for, to mentoring, helping you get licenses, procurement assistance, financial assistance programs and much more. 

The New Jersey Economic Development Authority (NJ EDA) can help your New Jersey business grow through their different financing options, tax credits, and grants.  
New Jersey Small Business Development Centers offer free counseling to businesses statewide. They can help with everything from creating a business plan to protecting your business from cybersecurity threats. At a minimum, sign up for their free newsletter to be alerted to upcoming events and assistance programs.