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Local small business loans

Your community can be great resource for financing to start or grow a business.

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Local small business loans can be a great resource when you need funds to start or grow your company. Microlenders offer one of the few low-cost financing available to entrepreneurs. And community banks can offer low-cost loans to more established businesses — with a side of expert advice on the local industry and market.

Not sure where to start? A local small business center can help point you in the right direction.

Local COVID-19 relief for small businesses

Many states, counties and other local governments have loan and grant programs for small businesses that have been impacted by the coronavirus outbreak. These can be good options for small businesses that can’t fully benefit from federal options like the Paycheck Protection Program (PPP).

While programs tend to run out of funds quickly, many reopen when more funding is available. You can often stay up to date by signing up for a mailing list at a local small business development center.

4 types of local small business loans

Here are the main types of small business loans that are available in most communities.

Microloans

  • Best for: Startups bad credit business owners and nonprofits

Microlenders are typically nonprofit organizations with a mission to bolster the economy in the community it serves. They tend to specialize in funding business owners that are underrepresented in the lending market, such as recent immigrants, BIPOC entrepreneurs and women. Usually you can borrow from $500 to $50,000 with rates starting at around 12% to 15%.

Many microlenders also offer free training courses to guide entrepreneurs through the basics of running a business. Some only offer small amounts of funding at first, you can often qualify for larger amounts after a set period of time — sometimes as much as $1 million.

SBA microloans

  • Best for: Small businesses and nonprofit childcare centers

The Small Business Administration (SBA)’s microlending program offers loans up to $50,000 — though the average loan is $13,000. Typically rates fall between 8% and 13% annual percentage rate (APR), with terms up to six years.

These are available through nonprofit community organizations, that act as intermediaries between you and SBA. Each intermediary sets its own rates, terms and requirements.

Many microlenders participate in this program, though not all do. You can find an SBA microloan intermediary by reaching out to your local SBA district office for more details.

Community bank business loans

  • Best for: Established businesses that serve a local market — and sometimes startups

Community banks can be a great resource to small business owners. They tend to have more flexible requirements than big banks. And some even offer startup loans — though you typically need to have good or excellent credit to qualify.

Working with a community bank involves building a partnership with your lender. Experienced bankers should know the nuances of your industry and market and can offer advice. They can also anticipate your financing needs based on your business’s financial statements.

Credit union business loans

  • Best for: Businesses with credit union accounts

Though less common than community bank financing, some credit unions also offer business loans. These can sometimes have more flexible requirements than banks, since credit unions are nonprofit lenders. But in many cases, you and all business owners have to become a member first.

For this reason, the main draw is convenience. If you already have an account, getting financing from a credit union can help keep your funds in the same place. But since credit unions typically don’t specialize in business financing a community bank might be a better choice.

How to find a local lender

Setting up an appointment with a local business center in your area can be a great way to go over all of the options available to you. The SBA’s Small Business Development Centers (SBDCs) often host informational events and offer free counseling sessions to members of the local business community.

You can use the SBA’s local assistance search tool to find SBDCs as well as Veterans Business Outreach Centers, Women’s Business Centers and more.

Who benefits the most from local business loans

Local lenders can be a great resource to small businesses that can’t qualify for financing from a big bank. These lenders can be particularly great for startups and business owners from underserved communities. And many offer training and advice to help your business grow at a healthy pace.

When to consider other options

Loans from large national banks tend to come with the most favorable rates and terms — you can get a better deal if you’re eligible. And funding amounts with local lenders might be too for midsize firms.

If you don’t have the time for a lengthy application or need financing fast, an online lender might also be a better choice than a local lender.

Compare small business loans

These lenders can fill the gap when your local options are limited.

Data updated regularly
Name Product Filter Values Loan amount APR Requirements
Fora Financial business loans
Fora Financial business loans
$5,000 – $500,000
Varies
6+ months in business, $12,000+ monthly revenue, no open bankruptcies
Get qualified for funding in minutes for up to $500,000 without affecting your credit score. Great for SBA loan applicants.
ROK Financial business loans
ROK Financial business loans
$10,000 – $5,000,000
Starting at 6%
Eligibility criteria 3+ months in business, $15,000+ in monthly gross sales or $180,000+ in annual sales
A connection service for all types of businesses — even startups.
OnDeck small business loans
Finder Rating: 4.7 / 5: ★★★★★
OnDeck small business loans
$5,000 – $250,000
As low as 11.89%
600+ personal credit score, 1 year in business, $100,000+ annual revenue
A leading online business lender offering flexible financing at competitive fixed rates.
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Compare up to 4 providers

Bottom line

Local small business loans can be a good resource for firms and entrepreneurs looking for small amounts of funding. And the training programs or expert advice can be particularly helpful to first-time business owners.

But see how your local lender holds up to our picks for the best business loans before you apply.

Photo: Getty Images

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