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How to get a loan as a small business in Massachusetts, and other tips

Vaseline

BARNSTABLE – The Small Business Administration played matchmaker at the high school Wednesday, where local lenders were on hand to talk to small business owners about how to tap capital to start, grow or expand.

The event attracted nine lenders and 15 organizations that could provide resources to help small businesses obtain loans. About 200 small businesses registered for the event, according to Robert Nelson, the SBA’s Massachusetts district director.

“There is a boom of small businesses in Massachusetts,” Nelson said.

He said 17 million small businesses have started nationally since the start of the Biden-Harris administration, setting a record. The average monthly number of small business startups nationwide is 440,000. The SBA has been a crucial partner in that growth. The government agency offers a variety of loans from $500 to $5.5 million, but each has different permitted uses, loan limits, repayment terms and approval requirements.

Cape Cod saw $35 million in Small Business Administration loans in 2023

Last year, the SBA processed $27.5 billion in 7A loans, which are guaranteed loans to lenders, and $6.4 billion in 504 loans, Nelson said. The 504 loans are generally for loans for personal use or for funds to purchase major equipment. SBA guarantees make it easier for lenders to approve loans.

In Massachusetts, the SBA provided $818 million in capital support last year through 504, 7A and microloan programs. In Barnstable County, $35 million in more than 100 loans were made.

They include loans to providers of home care, food and cleaning services, restaurants, interior design, electrical and carpentry companies and home, toy and game stores, Nelson said. Loans were made to new businesses, established businesses, and businesses owned by women, veterans, and people of color.

What lenders want from a small business owner looking for a loan:

Do your due diligence before looking for a lender. Find a lender you can trust and who will work with you. Don’t get discouraged. Be prepared with a business plan, elevator speech, and insight into the company and industry.

How much money is needed and for what? Provide estimates of what is needed. Show how sales are generated and who your key suppliers are. Provide financial projections.

Lenders want to know how much capital an owner has put into a project.

Trying to get a loan when there are negative points in your background

“Put the skunk on the table,” says Eric Bancroft, vice president and SBA specialist at TD Bank. “Disclose the negative aspects of your business. Have you filed for bankruptcy? What is your debt?”

Personal information that may be considered includes credit issues, personal tax returns and financial statements, business tax returns, other assets, and other sources of income, including spousal and passive income.

Respond quickly to lender questions during the underwriting process. Provide a list of professional advisors (paid and free) who help the company. Schedule appraisals or environmental assessments as necessary.

Is there a guarantee from spouses or partners, or from other assets or sources of income? Are there credit problems? Lenders will look at personal tax returns and personal financial statements, business tax returns and your skills as these align with the business.

Collaborate with the local government

All cities and towns must comply with the general laws of Massachusetts. Understanding the process in one city can help with bids for other cities. Consider small jobs for bidding and build relationships with larger contractors. Opportunities may arise for jobs such as carpet cleaning or school cleaning services. Use this as a springboard to other opportunities.

Working with Massachusetts

Massachusetts must meet benchmarks for doing business with minority-owned businesses. A company must be certified for quality. Once certified, there are more opportunities to work with larger suppliers who have diversity commitments.

The state’s Operational Services Division offers a free 3-hour training to become certified.

The Office of the Inspector General offers a two-day course on government procurement procedures and requirements.

The state uses COMMBUYS for purchasing. Find out how the state buys what you sell.

Denise Coffey writes about business, tourism and issues affecting the Cape’s residents and visitors. Contact her at [email protected] .

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