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Alabama Small Business Loans: Top Lenders, Funding and Tips


Alabama Businesses

Alabama is home to over 400,000 small businesses, the backbone of the state's economy. Access to capital through loans and financing is the lifeblood entrepreneurial ventures need to start, grow, and thrive. This comprehensive guide examines the landscape of small business lending and financing options in Alabama – the types of loans available, top in-state lenders and resources, and how to secure funding to pursue your business goals.


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An Overview of Small Business Loans and Financing in Alabama


Small businesses power job creation and economic growth across Alabama from Birmingham to Huntsville. The U.S. Small Business Administration (SBA) and its lending partners provide a range of loan programs to help Alabama's small businesses access the financing they need. Here's a quick look at the types of small business loans available in Alabama:


  • SBA 7(a) loans – The SBA's primary and most flexible loan program. Loan amounts up to $5 million. It can be used for working capital, equipment, machinery, furniture, fixtures, inventory, business acquisition, refinancing debt, and more.

  • SBA 504 loans – For purchasing and improving owner-occupied real estate and heavy equipment. 504 loans feature low down payments and attractive long-term fixed interest rates.

  • SBA microloans – Loans up to $50,000 from non-profit lenders for startups and businesses with smaller financing needs.

  • SBA Express loans – Fast turnaround loans up to $350,000 from SBA lending partners, typically used for working capital and other needs.

  • Alternative business loans – Online lenders and fintech companies provide lending and financing that fill gaps beyond traditional SBA options.

  • Business lines of credit – Revolving credit funds provide flexible access to capital from banks as needed.

  • Equipment financing – Loans specifically to purchase equipment, machinery, and other fixed assets are offered by banks and other lenders.

  • Invoice factoring – Sell outstanding invoices to access the cash needed to cover operating expenses quickly.

  • Business credit cards – Credit cards tailored for business expenses and rewards.


This wide range of financing options provides Alabama small businesses the capital they need to seize opportunities and pursue growth. From startup costs to expansions, equipment purchases, and invoice factoring, loan and financing vehicles are available for companies throughout all stages of the business life cycle.


Top SBA Lenders in Alabama


The SBA guarantees portions of loans made by authorized SBA lenders in Alabama. This reduces risk for lenders and makes it possible to offer loans with lower interest rates and more favorable repayment terms tailored to small businesses. Here are some of the top SBA lenders headquartered or very active in Alabama:


  • Regions Bank

  • BBVA Compass

  • ServisFirst Bank

  • IBERIABANK

  • Cadence Bank 

  • Wells Fargo

  • Synovus

  • United Bank

  • LendTek


This mix of national, regional, and local banks are SBA lending leaders in Alabama. They provide 7(a), 504, and microloans to small businesses across industries, stages of growth, and specific financing needs.


In addition to banks, many credit unions in Alabama offer SBA loans, such as Max Credit Union, America's First Federal Credit Union, Alabama Credit Union, and more. There are also active non-profit microlenders like the [Economic Development Partnership of Alabama](https://edpa.org/services/entrepreneurial-solutions/microloan-program/), which provides loans through its Small Business Development Center offices across the state.


Securing an SBA 7(a) Loan in Alabama 


The 7(a) loan program is the SBA's primary program for providing financial assistance to small businesses. 7(a) loans are provided by SBA lending partners and guaranteed by the SBA.


Here's a quick overview of SBA 7(a) loans in Alabama:


Uses – 7(a) loan proceeds can be used for nearly any business purpose, including working capital, equipment, furniture, fixtures, inventory, business acquisition, refinancing debt, and more. 


Loan amounts – 7(a) loans range from $5,000 to $5 million. The maximum loan amount is $3.75 million for loans to be repaid in 7 years or less.


Terms – 7(a) loan terms vary from 10 to 25 years, depending on the purpose of the loan and collateral used. Interest rates can be fixed or variable.


Guarantee – The SBA guarantees the lender 75-90% of the loan amount. This reduces risk so lenders can provide reasonable rates/terms.


Collateral – 7(a) loans require collateral, but the SBA cannot decline a loan solely for insufficient collateral. All eligible business assets secure the loan.


Eligibility – Virtually all for-profit small businesses that meet SBA size standards qualify. This includes startups, existing businesses, and buyers looking to acquire a small business.


Application – 7(a) loan applications are submitted to SBA lending partners. The average turnaround time is 5-10 days from submission to approval.


7(a) loans are the most flexible SBA financing option for Alabama small businesses in terms of use of proceeds and borrowing amounts. With many participating lenders across the state, 7(a) loans make financing accessible for nearly any business purpose.


SBA 504 Loans for Purchasing Real Estate and Equipment


For Alabama small business owners looking to acquire real estate, expand facilities, or purchase heavy equipment – the SBA 504 loan program is made-to-order. 504 loans offer attractive 10 or 20-year fixed interest rates and low down payments, making these large investments more affordable.


Here are some of the details on SBA 504 loans in Alabama:


Use of Proceeds – At least 51% must be used to purchase owner-occupied real estate or improve facilities. The remainder can fund equipment, furniture, and other fixed assets. 


Loan Amount – Maximum 504 loan amount is $5 million. 504 can fund up to 40% of total eligible project costs. 


Down Payment – The borrower's down payment is typically only 10% for real estate & equipment purchased with 504 funds.


Terms – 504 loans have a 10 or 20-year fixed interest rate set when the loan closes. Long terms keep monthly payments low.


Collateral – 504 loans are collateralized by a senior lien on the real estate and equipment financed.


Eligibility – Most for-profit small businesses that meet SBA size standards qualify. However, a few types, such as hotels, casinos, churches, etc., are prohibited.


Application – Initiated through a [Certified Development Company (CDC)](https://www.sba.gov/funding-programs/surety-bonds/cdc-504-loan-program) operating in Alabama.


The 504 loan program helps Alabama entrepreneurs and business owners strategically finance major assets to aid growth and success. The low 10% down payment feature helps conserve capital, which can be deployed elsewhere.


SBA Microloans – Loans Up to $50,000


Does your business need a smaller loan to fund a startup, fill a working capital gap, or purchase equipment or supplies? The SBA microloan program provides loans up to $50,000 through mission-driven non-profit lenders. 


In Alabama, microloans are provided by community lenders on behalf of the SBA, such as the Economic Development Partnership of Alabama.


Here are some key details on these small but powerful SBA microloan options:

 

Loan amount – SBA microloans in Alabama range from $500 to $50,000. The average loan is around $14,000.


Use of proceeds – The proceeds can be used for working capital, inventory, supplies, furniture, fixtures, machinery/equipment, and more. At least 25% must be used for inventory/supplies.


Terms – Up to 6 years for loan amounts over $10,000. Interest rates vary but average 7-10%. 


Collateral – Lenders may require collateral like business equipment, vehicle titles, etc. Requirements vary.


Eligibility – Must be classified as "small" by SBA size standards. Startups are eligible if they demonstrate the ability to repay. 


Application – You can Apply through the local intermediary lender's website or office. You can also access technical assistance.


For brand-new startups or existing small businesses, SBA microloans up to $50,000 provide an accessible financing option when bank loan amounts may be too large or out of reach. The streamlined application process through local lenders and the ability to access training and assistance make these loans extremely valuable.


For your small business loan needs, you have Lendtek. Contact us today!


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