Guide to Borrowing Money for the Small Business Owner
With the country’s 28 million small businesses generating 54 percent of the sales that occur throughout the United States each year, it’s clear that small businesses are big business in America. Small businesses currently provide 55 percent of the jobs held by workers and they have created the majority of new jobs since the 1970s, adding 8 million new jobs since 1990 alone. Since 1982, the number of small businesses operating in the United States has grown by 49 percent.
As it is across the country, small businesses are big business in Pennsylvania, too. The nearly 200,000 thousand small businesses located in the southcentral part of the state generate a GDP of $13.5 billion annually. Founded in 2007, Centric Bank was established to help people achieve their dreams. Since we opened our doors, we have been helping entrepreneurs start or expand their own businesses. Our loan volume has increased more than 20 percent annually because current and aspiring business owners know that when you work with Centric Bank, your needs become our highest priorities.
Business owners often have banking needs that are driven not only by their business aspirations, but also by their personal goals. Because their professional and personal ambitions are so intimately entwined, entrepreneurs require a special mix of financial products and services to achieve them.
If a business is new, its owner may need startup capital. Even if a business has been thriving for years, its owner may need extra cash to cover its operating expenses during slow periods, or additional capital may be required to expand operations. Sometimes, small business owners face obstacles when it comes to securing a mortgage or line of credit because their income isn’t guaranteed by an employer.
On both national and regional bases, small businesses are the backbone of our economy in terms of GDP and providing jobs and the goods and services we use every day. Being so integral to the success of our community and nation, small business owners deserve to have access to financial products and services that are specifically designed to satisfy their individual needs and help them succeed in their place of business as well as their personal lives.
Borrowing Options for Small Businesses and Startups
According to the Small Business Administration, the average loan amount extended by banks to small businesses is approximately $130,000 - $140,000. SBA loans range from $5,000 microloans up to $5,000,000 loans. The average SBA loan is approximately $371,000.
Whether you want to pursue a traditional bank loan, an SBA loan, or a line of credit, the first step to securing financing for your business is to learn what your lending options are. At Centric Bank, we know your situation is different from everyone else’s, which is why we look at the whole picture instead of just numbers on pieces of paper when we make our lending decisions. Remember – We Revolve Around You.
We offer several financing options at Centric Bank and because we’re a local, community bank, our local leaders can structure a solution customized for your unique situation.
You can use an SBA (Small Business Administration) loan to purchase real estate or equipment. You can also use this type of loan to finance the growth of your business, smooth out your cash flow, or renovate your current business location. Most SBA loans do not have balloon payments or pre-payment penalties. Several types of SBA loans are available to small business owners, including:
- General Small Business Loans: 7(a): This type of loan is generally used to refinance existing debt, buy assets such as a company vehicle or computers, or establish or expand a small business.
- Express Loans: You can use an express loan for the same purposes that a 7(a) loan can be used. You also have the option to use an Express loan as a revolving line of credit.
- Real Estate & Equipment Loans: CDC/504: SBA 504 loans are generally reserved for more expensive projects such as the acquisition of real estate or high-dollar capital equipment.
As of September 30, 2016, Centric Bank had loaned more SBA money to small businesses than any other bank in the SBA’s Eastern Division. Our SBA loan experts can help you access the funds you need to start or expand your business.
Lines & Letters of Credit:
Our local lenders work closely with business owners, and we know that a business’ cash flow often fluctuates, sometimes for a predictable reason such as a change of season and sometimes for an unexpected reason such as a malfunctioning piece of essential equipment. To help you manage your cash flow more efficiently and meet your short-term working capital needs, we offer secured and unsecured lines and letters of credit. Our lines and letters of credit have flexible terms, competitive rates, low minimum loan amounts, and an easy application process that we’ll walk you through.
Commercial Term Loans:
This type of loan has a fixed term and defined periodic payments. A commercial term loan can take the form of a working capital loan, a vehicle or equipment loan or a seasonal time note. You can use a commercial term loan to purchase equipment or other capital assets.
Working with so many small and medium-sized businesses in our community, we know that certain industries have similar borrowing needs. That’s why we’ve developed industry-specific lending programs that are designed to accommodate entrepreneurs who work in certain professions. Our industry-specific lending solutions are available to people in the following fields:
- Professional Practices such as accountants and attorneys
- Governments and Municipalities
- Non-Profit Organizations
Documentation for Borrowing Money as a Small Business or Startup
While Centric Bank has different lending options available to current and future business owners, the application process for our loans and lines of credit is similar no matter which lending solution you pursue. Our local lenders have more than 300 combined years of experience with helping business owners get the funds they need to start or grow their businesses. At Centric Bank we will work with you to help find the lending solution that is best.
When you apply for a loan through us, we look at the broader picture, meaning we don’t rely on just a person’s FICO score when we make a lending decision. Instead, we get to know you and develop a thorough understanding of your goals. Your personal character and the impact your undertaking will have on our shared community are important to our decision-making process. Our decisions are made by professionals who live in this area and are dedicated to seeing you, your business, and our community thrive.
Depending on the type of lending solution you choose, we may ask you to provide certain pieces of relevant information for our review, including the following:
- Personal and business financial statements
- Business plan, including summaries of your and your partners’ education and work experience
- Cash flow projections for the next 12 months
- Personal loan guarantees from all principals involved in the business
- Personal and business credit history
In addition to the documentation mentioned above, we’re also going to want assurance that you are seeking a loan for a sound business purpose. We will evaluate your ability to repay the loan and recommend the collateral best suited to secure the loan, if applicable.
Tips for Borrowing Money for Your Business
Here are some tips we hope will be useful whether you are looking to acquire a letter of credit, a commercial loan, or an SBA-guaranteed loan:
- Choose Your Lender Wisely: In general, larger commercial banks are not as willing to loan money to small business owners as community banks are. As your community bank, we look forward to speaking with you about the money you need to pursue your entrepreneurial dreams because when we invest in you, we invest in our community. As your business grows, you’ll hire more of our neighbors and provide more of the products and services all of us need. To us, that’s a great return on our investment.
- Educate Yourself: Talk to a lending officer about the different lending solutions that are available to you. Ask about the specific documentation and materials you’ll need to provide in order to submit a loan application. At Centric Bank, we’ll help you collect the information you need to complete an application. We’ll work with you throughout the application process to ensure you get the best possible outcome. After all, we’re only successful when you are.
- Be Prepared When You Apply for Credit: To apply for a loan with confidence, be sure you take the time to prepare yourself. This means knowing your potential lenders beforehand and putting together a business plan, which will provide a valid structure of steps to follow. It’s also an important part of a funding application. You’ll need to consider what information lenders will need to assess your new practice as a good risk. Additionally, you may need to complete a comprehensive Personal Financial Statement (PFS) to evaluate your Business Loan Application. You can download a blank PFS form from our website.
If you would like to learn more about how Centric Bank’s banking services can help your business, stop by one of our locations today. We’ll discuss your lending options and determine which one is the most appropriate for you and your business. Whether you’re an existing client or you’re establishing a new relationship with us, we’re committed to helping you get the funds you need to achieve your goals.
Centric Bank – Smart Banking, Smarter Business Growth
We know you have options when it comes to your personal and business banking needs, which is why we are constantly working to provide you with smart banking solutions. We offer a comprehensive suite of banking services designed to accommodate the businesses, individuals, and families in our community. Our commitment to you is unwavering and we value the relationships we have with each and every one of our clients.
Whether you have an idea for a business or you already own a business, we encourage you to visit one of our convenient locations to learn how we can help you move forward. At Centric Bank, we don’t think that borrowing money as a small business or borrowing money for a business startup should be an overwhelming process. In fact, we look at the loan process as an opportunity to get to know you and your personal and business goals. In other words, discussing your financing options with you gives us the chance to establish a long-term relationship with one of our community’s invaluable entrepreneurs.
Centric Bank helped Jack Sproch, co-owner of Appalachian Brewing Company, achieve his dreams and we continue to support his business endeavors. When discussing his relationship with us, Sproch said,
“We’re undergoing our biggest expansion in Appalachian Brewing Company’s 18-year history. With seven central Pennsylvania brewpubs and two bottling plants, ABC has big-bank demands that Centric Bank easily supplies. We are fortunate to have a successful local bank with in-house financing expertise plus all the other services. From branch staff to upper management, we enjoy working with Centric [Bank]. Thanks for helping us grow this far, and we look forward to an amazing future.”
Just as we work with Appalachian Brewing Company, we’re ready to help you achieve your business aspirations. One of the most meaningful ways we help entrepreneurs is by giving them the information they need to make sound financial decisions. If you’re thinking about borrowing money for a business startup or to expand your current operation, we’ll explain the different lending options that are available to you as well as how the loan process works.
Our lending decisions are made by people who live in the local area and know our neighbors. As an SBA market leader and Top 50 Fastest Growing company for four consecutive years, we invest in our neighbors because we recognize that small and medium-sized businesses are critical to our local economy and way of life. Contact us to learn more about what we can do for you and your business today.