2022 Guide to Getting a Business Loan in North Carolina

North Carolina’s economy is driven largely by the success of its small businesses. After all, there are more than 930,000 small businesses in North Carolina, comprising over 99% of the total companies in the entire state. With over 45% of North Carolina’s workers employed by small businesses, it’s vital to the state’s success that governments and nonprofits do whatever they can to help those companies succeed.

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Small Businesses in North Carolina

According to a 2020 report from the United States Small Business Administration (SBA), nearly half of the workforce in North Carolina is employed by a small business – over 45%. That means that around 1.7 million people are employed by small businesses, and often very small businesses. Companies with 20-99 employees made up the largest percentage of all small businesses in the state.

There are a ton of advantages to doing business in North Carolina. For one, North Carolina has the 11th-largest GDP of any state to go along with a highly diversified economy. North Carolina has ten cities with over 100,000 residents as major urban centers, with Greenville just behind with 95,000. The largest among those cities is Charlotte, which has a metropolitan area populated by nearly a million people. North Carolina also features vast tracts of farmland. According to the United States Department of Agriculture (USDA), over 8 million acres of the state are dedicated to farmland. The state also features two major international airports: Charlotte Douglas International Airport in Charlotte to go alone with Wilmington International Airport in Wilmington. According to the US Census Bureau, over 32% of the workforce has at least a bachelor’s degree, so you know there’s a strong population of educated workers.

All that is to say that small businesses, whether they’re existing businesses or new businesses, are key to the economy of North Carolina, which is an excellent state in which to start such a business. And if you’re a small business owner or are looking to start up a company in the state, it’s vitally important to have a firm understanding of how to get a loan – what types of loans there are, how large they can be, and how you can use state and local advantages to give your company a better chance to succeed.

How to be Successful with Business Funding

Successfully finding and utilizing outside funding for your small business funding is often the product of smart planning. Get your business prepared to take outside funding by answering four quick questions.

  • How much money is owed to your business (accounts receivable)?

  • How much money does your business owe (accounts payable)?

  • How and when does your business recognize its costs and revenue?

  • What are your short-term and long-term financial goals for your business?

These questions will naturally answer many of the questions that are necessary to answer before you should seek any additional funding. Without knowing costs and revenues, you won’t be able to fully understand your cash flow. Without understanding your long-term goals, you might step into a situation in which you’re hastily seeking loans that can be financially catastrophic once repayment begins.

Answer these questions honestly and realistically, without the rose-colored glasses that entrepreneurs often wear while looking over their own company. Most solutions to the problems suggested by these four questions boil down to two types of outside funding: short-term funding and long-term funding.

Short Term Funding

Short-term funding is used to help businesses meet their short-term financial obligations, gain working capital, or take advantage of immediate financial opportunities. Typically, the time allowed to repay a short-term loan is 12 months or less but may extend out to as long as three years.

Because of the generally larger payments necessary in a short-term business loan, it’s often a good idea to make sure that the purpose of the loan is something that will result in increased revenue in the immediate future. You don’t want to take out a short-term loan that might result in a substantial increase in payments now when the increased revenue won’t be seen for two years.

Short-term business funding options differ most from longer-term financing in that they are often intended for a specific use and are often tied to strict repayment terms. In general, the narrow application of funds allows lenders to more effectively evaluate the business’s ability to repay the requested loan. In turn, these specialized short-term products can meet the needs of more businesses.

Alternative and online small business lenders most often provide short-term business funding. These lenders typically are not depository institutions like a traditional bank. Rather than function as a bank that gives loans, they operate as small business loan specialists. Specialized evaluation criteria used by these lenders mean the funding solutions can be more flexible and easier to access for businesses with less than perfect financial history.

Examples of short-term business funding include short-term traditional loans, bridge loans, invoice and inventory financing, merchant cash advances, and more. Short-term funding solutions often come with more strict repayment plans, collateral, or higher interest rates. To successfully use short-term funding options businesses should be prepared to make relatively larger payments in a shorter amount of time.

  • Short-term traditional loans: Short-term traditional loans in which a financial institution or online lender gives a certain amount of money in exchange for repayment within a certain timeframe at a certain interest rate. For short-term loans, these timeframes will typically be shorter in combination with higher interest rates and smaller loan amounts.

  • Bridge Loans: Bridge loans exist to cover expenses during the time between a person or company applying for or being approved for a new loan and the money arriving. While they’re mostly seen in real estate transactions, there are several other uses for bridge loans for small business owners.

  • Invoice and Inventory Financing: Invoice and inventory financing are methods of getting a loan in which one of those two items (either existing inventory or unpaid invoices) are held as collateral. You borrow money and use the existing inventory as your guarantee.

  • Merchant Cash Advances: In a merchant cash advance, a lender purchases a percentage of future credit and debit card transactions. You might receive $50,000 in exchange for paying back $75,000 by paying a percentage of every transaction.

Short-term lending can be a good fit if your business needs to increase cash flow quickly. Alternative and online small business lenders often have shorter applications and can be more efficient with their evaluation and underwriting processes.

In the end, this practice can get your business the funding it needs when it needs it while progressing faster toward decreasing business debt.

Long Term Funding

In general, long-term business loans have repayment terms between 3 and 10 years and are often associated with more traditional banking options. Long-term funding options can include bank loans, term loans, and line-of-credit loans.

The typical long-term small business loans feature similar characteristics, including predetermined repayment periods (loan term), use of interest rates, and more strict lending criteria. SBA guaranteed loans and bank loans used to start a business, to pay for fixed assets, pay employees, or ongoing operational costs are all examples of long-term funding and how it can be used.

  • Long-term traditional loans: Long-term traditional funding is when a lender lends a given amount, at an interest rate, and the borrower makes monthly payments. In a long-term lending situation, that repayment term can last anywhere from three years out past twenty years.

  • Business Lines of Credit: In a business line of credit, a lender will agree to a withdrawal limit. The borrower can then use up to that limit and make payments and pay interest only on the money borrowed under the limit. Lines of credit are also quite handy in that once you pay off a business line of credit, you can borrow again on that same line of credit.

  • Equipment Loans: With an equipment loan, some lenders will lend money to fund a specific equipment upgrade, purchase, or replacement. In those cases, the equipment itself is held as collateral, protecting the lender from undue financial risk. Equipment in some industries is wildly expensive, making these loans hugely important.

  • SBA Loans: An SBA loan is essentially a term loan guaranteed by the United States Small Business Administration (SBA), SBA loans are difficult to get, but can be the best possible solution in many scenarios. They can be massive, low-interest, and come with favorable repayment terms.

With the repayment period for some long-term business loans lasting up to 25 years, businesses should evaluate their longer-term financial goals and strategy before seeking this type of business funding.

Fixed assets that may be worth taking out a long-term loan to acquire include property or equipment used to perform business functions. Additionally, operational costs can include the costs associated with the production or transportation of goods provided by your business. While operational costs are often met with short-term loans, they may also be provided for by line-of-credit loans.

Longer-term business loans are often provided by depository lenders or banks. These loans generally have longer application processes, are intended for larger sums of money, and can be harder to qualify for.

To make traditional business funding available to a larger group of small businesses, digital lenders have begun lending term loans and other more traditional financial products. These offerings balanced with a more detailed evaluation of business performance is giving many small businesses greater options when it comes to funding.

Documents Needed to get a Small Business Loan in North Carolina

The exact documentation needed to apply for a business loan will depend on the lender, their criteria, and the type of loan being applied for. However, in general terms, business owners can expect to complete a loan application, provide credit history, and show proof of the business’s financial performance.

Generally, you’ll need most if not all of the following documents:

  • Completed loan application

  • Background information of borrower(s)

  • Value of property or asset (if applicable)

  • Business credit score

  • Personal credit score

  • Sources and uses of funds

  • Business liabilities or expenses

  • Business bank account statement

  • Business tax information

  • Proof of insurance

North Carolina’s Top Business Funding Options in 2022

There are several funding options for small business owners in North Carolina. Depending on your industry, locality, and size, you can work with funding options including traditional term loans, SBA loans, and more. If you’re located in one of the major cities within the state, whether it’s Charlotte or Raleigh or Wilmington and beyond, there are grants available to businesses specifically there, too. Regardless of where you’re located and what your company does, business owners should take the time to look over every possible option for external funding.

Top Banks in North Carolina

Many banks within the state offer small business financing and resources for entrepreneurs looking to make it in North Carolina. According to the SBA, Live Oak Bank out of Wilmington is the largest SBA lender in the state, with Wells Fargo and United Midwest Savings Bank just behind. These three lenders have had proven success working with the SBA’s most popular programs and getting borrowers the cash needed to build successful businesses.

Statewide Resources

There are several organizations, grants, and development funds either operated by the state of North Carolina or for small businesses anywhere in the state.

North Carolina Department of Commerce

The North Carolina Department of Commerce is a state-funded and state-operated resource hub for all things business in the Tar Heel State. The website for the NCDOC, found here, is a one-stop spot for everything a business owner in North Carolina could need. There’s a page with resources you’ll need to start a business, from registration to hiring, licensing, and taxes. There’s a page with information about the various key industries in the state, and there’s even a bilingual call center available to answer questions about doing business in North Carolina.

On top of all of those free resources, the DOC helps business owners with funding as well. There are hubs for several different specialized funds. There’s a fund set aside specifically for businesses looking to upgrade railway infrastructure, loans set aside for business owners looking to buy unused buildings, and many, many more. There’s also information about tax incentives.

North Carolina Small Business and Technology Development Center (SBTDC)

The SBTDC of North Carolina is a resource hub for growing companies developed in conjunction with the U.S. SBA and the University of North Carolina. The center features a professional staff able to meet with entrepreneurs throughout the state to help with anything from building a business plan, helping with marketing, or exploring funding opportunities.

Carolina Small Business Development Fund

The Carolina Small Business Development Fund is a certified community development financial institution (CDFI). They function as a nonprofit that supports small businesses in a variety of ways. There are coaching programs, an assessment tool for your business, and even a digital learning center.

Business Recovery Grant

If you’re an existing company and were adversely affected by the ongoing COVID-19 pandemic, the North Carolina Business Recovery Grant is a possibility. Companies that meet eligibility requirements can receive a payment of state and federal money. Eligible companies include businesses operating as hardware stores, gyms, dental offices, landscapers, tailors, and many more.

One North Carolina Fund

If your company is facing a project that may add significant jobs or economic development to your area, the One North Carolina Fund should be a worthy application. The funds must be used specifically to upgrade or purchase equipment, repair a structure, or improve utilities in new or existing buildings. The cash is doled out as the jobs are added, and applications are accepted on an ongoing basis.

Grants

In addition to loans, there are numerous grants available to business owners in North Carolina. For a full list, check out this page. Grants are offered for specific localities and counties, specific industries, and even business sizes. There are grants available to assist with agricultural businesses, childhood education, and more.

Check out the Grants page on the North Carolina Department of Commerce’s website as well. In several industries, like technology, agribusiness, and film, there are specific grants set up to help fund you in North Carolina.

Some business owners, particularly those in historically underserved populations, can be eligible for additional grants and other sources of funding. For example, Amber Grants for Women is a program that gives out regular $10,000 grants to women entrepreneurs every month.

Local Resources

There are ten large cities within the state of North Carolina, each of which with its own local and specialized resources and funding opportunities for small businesses. A few options are listed here, but each city may have its own specialized funds or loan options available for companies in the city limits.

Meck Lending

Meck Lending is a program offered by Mecklenburg County, home to Charlotte, the largest city in the state. Meck Lending offers business loans of up to $75,000 at a fixed prime interest rate. Eligible businesses must make less than $2 million per year, and the owner must have excellent credit. The funds can be used for a variety of business purposes, including working capital, purchase of inventory, and acquiring another business entirely.

Durham Loan Program

Durham County and the City of Durham created the Durham Small Business Opportunity Fund as a way to directly finance small businesses there. While the fund was established during the peak of the COVID-19 pandemic, efforts are ongoing to use the fund to further grow small businesses in the area.

Eligible businesses must have fewer than 50 full-time employees, revenue under $5 million on their most recent tax returns, two years of profitable operation, and good credit. If approved, these funds can also be used for most business purposes, like buying equipment, refinancing existing debt, and more.

SBA Resources

The United States SBA has regional offices throughout the country. In North Carolina, the office is located in Charlotte. It offers helpful resources, educational opportunities, and additional guides to funding. They offer a step-by-step guide to getting started, all the way from judging your business’s feasibility to filing trademarks and patents. In addition, they offer specific advice for seeking state and local government contracts.

Online Small Business Lenders

Online Lending Options, like Biz2Credit, are available wherever you are, whenever you need them. If your funding is needed quickly, it can be particularly advantageous to seek out an online lender who can get you cash quickly, no matter where you’re based.

There are some massive advantages to seeking funding through an online lender like Biz2Credit. Such companies are often built around small business funding specifically, so you know that you’re working with a lender with a focus and specialization in everything your business needs.

That also means these lenders work with shorter application processes and shorter waits for the funding to arrive, and they take a more holistic look at your company. Even if your credit isn’t as great as you’d like it to be, an online lender like Biz2Credit will be able to match your small business to a source of capital that’ll help you grow your business.

North Carolina Small Business Owner Case Study

As just one example of using small business loans to find success in North Carolina, read about the story of Bilal Bhatti, who owns and operates multiple franchises, like Auntie Anne's Pretzels and Nestlé Toll House Café out of states like Missouri, Iowa, and, of course, North Carolina. Bhatti was looking for funding to support several different purposes within his company, from expansion across four different states to generalized working capital.

After he applied Biz2Credit, he was able to receive funding within just three business days. That fast turnaround and personal touch were key in allowing Bhatti to add new locations to his growing portfolio of franchised locations. As he told Biz2Credit, "Without Biz2Credit, my business would not have expanded as quickly as it did. They provided me with the capital that allowed me to scale and sustain my business growth."

Here's the full story on how Bilal Bhatti’s was able to get fast funding from Biz2Credit.

Getting Started with Small Business Loans in North Carolina

You’ve made it through the 2022 guide to small business funding in North Carolina. Reaching your small business goals and attaining the funding you need is just a matter of getting started.

Small businesses in North Carolina have several funding options available to them, ranging from traditional bank loans to specific bridge loans that may help your business meet short-term financing needs. In every case, the best strategy for funding your small business is to be prepared with a plan for both your short-term and long-term financial goals. Business owners can expect application processes and underwriting to become longer or stricter as their financial ambitions grow larger.

Online lenders dedicated to business funding are a good way for North Carolina small businesses to access the funding they need when facing financial challenges or time constraints. However, business owners should consider all available options before choosing this next step toward financial growth.

Evaluate options specific to your state, region, and trade to find the best business financing option for you.

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