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There are many reasons why small businesses thrive in Michigan, including skilled labor in cities such as Detroit, Lansing, and Grand Rapids, as well as rural areas; strategic location providing access to both American and international markets; and the relatively low cost of living. Whether you are an entrepreneur looking to start a business or a small business owner looking to expand, a small business loan can help grow your Michigan business.

How Do Small Business Loans Work in Michigan?

Most lenders evaluating small business loan applications evaluate the business to determine its ability and willingness to repay the funding. To do this, they usually look at:

  • Time in business. How long has the business been running, or is it just the beginning? Many lenders prefer to work with companies with at least 1-2 years of experience.
  • Income. Many lenders will use bank statements to estimate the sales of a business. They can also use this information to analyze the cash flow of the business. Traditional lenders like banks or credit unions can also require tax returns for businesses.
  • Credit history. Most lenders will look at the owner’s personal credit ratings, although this may be a soft credit check that does not affect credit ratings. Some lenders will also consider business credit ratings or credit reports. (Find out how create a business loan.)

Highly qualified companies are likely to qualify for the lowest rates and conditions. There are often options for companies that only surpass a couple of these criteria, but they can be more expensive.

Small Business Loan Options in Michigan

If your business is located in Michigan and you are looking for a small business loan, you may have a variety of options. This includes:

Term loan

A fixed loan amount received for a fixed period of time with a predictable repayment schedule.

Credit lines

A flexible loan that allows you to borrow the amount you choose before your line of credit when you need funds. Bring it back and you can borrow it again. It is often used for short-term needs, including working capital.

SBA credits

These include loans guaranteed by the US Small Business Administration and provided by approved lenders such as banks. There are many SBA loan programs, including 7 (a), 504 loans, and export loans. (Disaster and Covid-19 relief loans are provided directly by the SBA.)

Credit cards

Small business credit cards give you access to a line of credit when you need it. If you get a card with a low interest rate, you will be able to minimize the interest expense on the loan.

Funding an account

Companies invoicing other businesses (B2B) can improve cash flow through invoicing factoring or financing. This allows the company to get paid on unpaid invoices faster.

Equipment financing

If your Michigan business uses equipment – be it manufacturing equipment or even computers – you can use equipment financing or leasing to keep cash flow and get the equipment your business needs.

What are the typical business loan terms in Michigan?

Conditions will vary widely depending on the type of funding and qualifications. Companies with strong personal and / or business credit and solid incomes are likely to be eligible for lower interest rates in single or low double digits. Business owners with poor credit or income fluctuations are likely to pay higher rates.

Repayment terms will also vary. Usually online lenders offer short-term loans (6 months to 5 years), while loans from banks and credit unions (including SBA loans) can have longer maturities of 5-25 years.

Who is Eligible for a Michigan Business Loan?

In terms of the industry, there are small business loans available for a wide variety of businesses, from real estate to restaurants, from agriculture to financial services, or from manufacturing to medical device technology.

Existing businesses with at least 1-2 years of experience are in a better position to receive funding, although there are startup funding options for business owners with industry experience and good credit history.

Again, keep in mind that most businesses will need to demonstrate high returns and / or good creditworthiness to qualify. However, the eligibility criteria differ depending on the lender.

How to Apply for a Business Loan in Michigan

You can apply for a small business loan through online lenders or traditional financial institutions such as banks. You can also work with a business loan broker or an online marketplace. The latter will help you select lenders based on your qualifications.

When preparing for financing, it is recommended:

  • Check your personal and business credit
  • Collect your commercial bank statements from the last six months
  • Provide a two-year tax return upon request.
  • Have the incorporation documents and business license on hand.

Some lenders may ask for additional information (like a business plan), but these are the basic elements that most business lenders ask for.

Michigan Small Business Loans

Companies affected by the coronavirus pandemic may still seek loans for coronavirus-related relief. The main programs include:

Economic Disaster Loans (EIDL): Low-interest loans are available to qualified businesses and non-profit organizations affected by the pandemic. Apply through the SBA.

Payroll Protection Program (PPP) Loans: Bad loans based on wages (or income for self-employed persons). This loan program is currently closed to new applications.

Restaurant Revitalization Fund: This program provides restaurants with funding equal to the loss of revenue due to the pandemic, up to $ 10 million per business and no more than $ 5 million per physical location. Recipients are not required to pay funding if funds are used for eligible purposes no later than March 11, 2023. Apply for SBA.gov

There are other programs that can help businesses recover from the pandemic crisis, such as grants, unemployment benefits for the self-employed, and local funding. The organizations listed below can help businesses find these resources.

Small Business Resources in Michigan

In addition to small business loans, there are many programs that can help Michigan small businesses grow:

This article was originally written on June 14, 2021.

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