2022 Guide to Getting a Business Loan in Virginia

Virginia’s economy is driven largely by the success of its small businesses. After all, there are more than 766,000 small businesses in the commonwealth, comprising over 99% of total companies in the state. With nearly half of Virginia’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 Virginia

According to a 2020 report from the United commonwealths Small Business Administration (SBA), nearly half of the workforce in Virginia is employed by a small business – over 47%. That means that around 1.6 million people are employed by a small business, and often a very small business. Companies with 20-99 employees made up the largest percentage of all small businesses in the commonwealth.

There are a ton of advantages to doing business in Virginia. For one, Virginia has the 13th-largest GDP of any state to go along with a highly diversified economy. Virginia has eight cities with over 100,000 residents as major urban centers, including Virginia Beach, which has a metropolitan area populated by nearly two million people. Virginia also features vast tracts of farmland. According to the United States Department of Agriculture, nearly 8 million acres of the commonwealth are dedicated to farmland. The commonwealth also features four international airports, including Reagan International Airport in Arlington, which services not only the Commonwealth of Virginia but nearby Washington D.C. According to the US Census Bureau, nearly 40% of the workforce has at least a bachelor’s degree, so you’ll be able to hire from a population educated above the average of the country as a whole.

All that is to say that small businesses and small business owners are key to the economy of Virginia, which is an excellent state in which to start such a business. 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 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: 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 in 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: These are the traditional loans you think of. Lenders lend 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: With 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: 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 Virginia

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 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

Virginia’s Top Business Funding Options in 2022

There is a number of funding options for small business owners in Virginia. 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 commonwealth, whether it’s Norfolk or Virginia Beach or Arlington 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 Virginia

Many banks within the state offer small business financing and resources for entrepreneurs looking to make it in Virginia. According to the SBA, First Bank and Trust Company, Newtek Small Business Finance, Inc, and Wells Fargo are the three largest distributors of SBA loans, having given out over 60 loans so far in the fiscal year 2022. These three lenders have had proven success working with the SBA’s most popular programs and getting borrowers the cash needed to build a successful business.

State Resources

The state of Virginia itself offers several helpful resources to get funding for small businesses within the state.

First, look into the Virginia Small Business Financing Authority (VSBFA). The VSBFA is a program set up through Virginia’s Department of Small Business and Supplier Diversity. There are a variety of programs within the VSBFA that can help your business depending on its age and needs.

Economic Development Loan Fund
For businesses that meet at least one of several qualifying criteria, the Economic Development Loan Fund is a direct-to-consumer lending program designed to help small businesses make purchases in conjunction with traditional bank lending. Typically, a loan from this program will help fill the gap between the bank loan and purchase price and will usually have favorable terms to help the small business grow.

SWaM Business Loan Fund
These are direct-to-consumer loans of less than $25,000. The loans are meant specifically to finance inventory, purchase furniture, equipment, technology, or other infrastructure, or function as permanent working capital.

Child Care Financing Program
A program intended specifically for businesses operating in the childcare field. Often, but not always, given in conjunction with a traditional bank loan.

Cash Collateral Program
A program in which the VSBFA offers cash to help a small business achieve the collateral required for a traditional bank loan.

Loan Guaranty Program
The VSBFA is able to spend up to $750,000 to help guarantee a traditional bank loan or line of credit.

Capital Access Program
This program operates as insurance for particular bank loans on the side of the lender. It’s intended to make small businesses additionally creditworthy for favorable bank loans.

Additional information, application documents, and the fine print on all of the preceding programs is available on the VSBFA website, found here.

Virginia Community Capital (VCC) is an organization created as a Community Development Financial Institution initially funded with state funds in 2006. VCC operates as both a non-profit and a for-profit bank, meaning that they’ve financed nearly $2 billion for Virginia small businesses. VCC is able to provide funding for acquisitions, real estate purchases, debt refinancing, and even lines of credit. You can also go to VCC to help with an SBA loan, and they offer advice and other resources for entrepreneurs.

There’s also the Virginia 30 Day Fund, which is a nonprofit organization set up to help small businesses with funding, particularly since the rise of the COVID-19 pandemic. Eligible small businesses employ 3-30 people, are based in Virginia and are operated by people living in the commonwealth as well. The funds given out by the VA 30 Day Fund are completely forgivable, which is to say that they do NOT need to be repaid. The organization exists entirely to ensure that small business jobs remain active in Virginia, so if you’re able to receive this funding it can be a huge boon to a small business that has been struggling since the pandemic.

Grants

In addition to loans, there are numerous grants available to business owners in Virginia. 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.

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 and Specialized Resources

There are eight large cities within the Commonwealth of Virginia, each of which with its own local and specialized resources and funding opportunities for small businesses.

Early in 2022, for example, the city of Virginia Beach offered up the Virginia Beach Small Business Capital Access Program. This program provided $400,000 in zero-interest loans to qualifying small businesses that have been in operation for more than two years and have shown healthy revenue.

Virginia Beach also created The Hive, a high-tech coworking space on Independence Boulevard which functions as a space for local entrepreneurs to work, collaborate, seek resources, and help grow their businesses.

In Arlington, the city offers confidential business mentorship along with a program called BizLaunch, which provides marketing resources, networking opportunities, and other helpful resources.

SBA Resources

The United States SBA has regional offices throughout the country. In Virginia, the office is located in Richmond. It offers helpful resources, educational opportunities, and 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 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.

Virginia Case Study

As just one example of using small business loans to find success in Virginia, 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, Virginia. 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 submitted an application through Biz2Credit, he was able to receive funding within just three business days. That fast turnaround and personal touch was 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."

To read more about Bilal Bhatti and his journey to getting a small business loan as a small business owner in Virginia, check out his Biz2Credit success story.

Getting Started with Small Business Loans in Virginia

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

Small businesses in Virginia 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 Virginia 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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