Small businesses are the backbone of local economies across North Carolina. Access to financing is crucial for small business owners to start, run, and grow their operations. Business loans allow entrepreneurs to fund expansions, hire employees, purchase equipment and real estate, and bridge cash flow gaps. With the right loan product and lender, small businesses in North Carolina can get the capital they need to achieve their goals.
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Why Small Business Loans Matter in North Carolina?
North Carolina is home to over 900,000 small businesses, comprising 99.6% of all companies in the state. These small enterprises employ 1.6 million North Carolinians, or approximately half of the private workforce. The small business sector is vital for driving economic growth, creating jobs, and strengthening communities.
However, many small business owners face challenges securing financing from traditional lenders like big banks. Small businesses may lack sufficient operating history, collateral, or credit scores to qualify for standard commercial loans. Fortunately, the state offers a variety of alternative lending programs tailored to the needs of small and start-up businesses.
Types of Small Business Loans in North Carolina
Several loan options are available to North Carolina businesses through private lenders, non-profit lenders, and state and federal programs.
SBA Loans
The U.S. Small Business Administration guarantees loans from approved lenders to qualifying small businesses. The most common SBA loans are 7(a) loans that can be used for working capital, equipment, real estate, and other business expenses. SBA 504 loans provide long-term, fixed-rate financing for real estate and equipment.
SBA loans can be great options for start-ups and existing small businesses looking to expand. The SBA guarantees portions of these loans, which gives lenders more confidence to approve financing. SBA 7(a) loans can be up to $5 million, and 504 loans can be up to $5.5 million.
Conventional Bank Loans
Many small business owners work with their local bank or credit union to get a term loan or business line of credit. These are based on the borrower's creditworthiness rather than SBA criteria. Traditional banks can be a good source for small business loans, lines of credit, and business checking accounts.
Non-profit Lenders
Non-profit lenders like community development financial institutions (CDFIs) provide loans with flexible criteria to underserved businesses. Local examples include Carolina Small Business Development Fund and Mountain BizWorks. CDFIs help fill gaps for very small businesses, start-ups, and minority-owned companies who can't get bank financing.
Microloans
Microloans of up to $50,000 allow very small businesses and start-ups to access capital through non-profit lenders. These quick, small loans can be used for equipment, inventory, marketing, training, and other start-up costs. Microloans are a great option for North Carolina businesses just getting off the ground who need small capital injections.
Government Programs
North Carolina offers state-funded loans and grants for small businesses through programs like the OneNC Small Business Program. Local governments also have revolving loan funds targeted to businesses in their communities. Government small business loans and grants can provide affordable financing when banks aren't an option.
The State of North Carolina provides resources for small business owners through the NC Small Business and Technology Development Center network. They offer free business counseling and guidance across the state. Visit their website to find an office in your region.
Top Lenders for North Carolina Small Businesses
The state has a diverse ecosystem of lenders serving small business owners' financing needs. Here are some of the top options:
Live Oak Bank - Offers SBA and business term loans statewide. They have over 20 branch locations around North Carolina.
First Citizens Bank - Major regional bank with small business loans and lines of credit. First Citizens offers online applications and over 160 branches across NC.
Lendistry - Online lender with SBA 7(a) and microloans. Their online process expands access to underserved communities.
Carolina Small Business Development Fund - Non-profit lender with $500 to $250k loans. They help entrepreneurs in the Triangle region.
Mountain BizWorks - WNC-based CDFI with small business loans up to $250k. They serve entrepreneurs in western North Carolina.
Asheville Area Habitat for Humanity - Affordable SBA Community Advantage loans. They assist women entrepreneurs and minority-owned businesses.
Thread Capital - Fintech lender focused on underserved businesses and start-ups. Offers flexible financing options with a quick application process.
Cape Fear Regional CDFI - Serves southeastern North Carolina; loans up to $250k. Focuses on economically distressed communities.
Lendtek - Get your business approved for the perfect loan option, in minutes. Fast, simple, won't impact your credit score. We operate nationwide.
Tips for North Carolina Small Businesses Seeking Loans
If you're a North Carolina small business owner applying for financing, here are some tips to improve your chances of getting approved:
Have a strong business plan that outlines how the loan will be repaid. Lenders want to see you've thought through your business model and financial projections.
Provide historical and projected financial statements. This gives lenders insight into your business operations and profitability.
Build your personal and business credit score. Good credit makes you look like a lower lending risk. Check your business credit reports too.
Offer collateral like equipment, accounts receivable, or real estate to secure the loan. Assets to back the loan boost your chances of approval.
Highlight the experience and expertise of your management team. A strong squad signals you can execute the business plan and repay debt.
Seek coaching and technical assistance to strengthen your application. Free SBA resources can help polish your loan package.
Explore both conventional and alternative lending sources. Compare options to find the best financing fit based on your needs.
Ask lenders to explain the loan process, requirements, and repayment terms. Being informed helps avoid surprises down the road.
Challenges for Underserved Entrepreneurs
While small business lending has expanded in recent decades, significant gaps remain for historically underserved groups like women entrepreneurs and business owners of color. Research shows that Black-owned firms are more likely to be denied loans even when controlling for business and owner characteristics.
Systemic barriers that need addressing include:
Access to banking and credit - Minority neighborhoods often lack bank branches, limiting relationships.
Collateral requirements - Community wealth gaps make it harder for Black and Hispanic business owners to provide collateral.
Higher denial rates - Studies confirm higher loan denial likelihoods for equally qualified minority applicants.
Trust and communication - Minority entrepreneurs are less trusting of banks and may not seek financing.
Thankfully, mission-driven lenders, CDFIs, and special loan programs are expanding access and working to close these gaps. However, ongoing effort is needed to ensure entrepreneurs from all backgrounds have opportunities to start and grow businesses through fair access to capital.
The Bottom Line
Access to capital remains a major pain point for many promising small enterprises across North Carolina. However, the diverse landscape of lenders and loan products available means there are opportunities for business owners who do their research and put together a strong application. With customized guidance and persistence, small business owners can find the financing they need to succeed in North Carolina.