Colorado offers a diverse economy where small businesses can grow and thrive. The state is notable for its concentration of high-tech industries and scientific research, along with agriculture, tourism, aerospace, manufacturing, and mining. Denver is the largest urban center in the Rocky Mountain region, while the rest of the state also provides ample business opportunities.
Small business owners in Colorado often require financing help to compete in the state’s competitive market. Fortunately, there are many loan and lender options to consider. However, it’s crucial to understand how Colorado business loans work to choose the best one. Finding the right loan for your needs that’s also conducive to cash flow helps avoid business loan pitfalls and fuel success in the Centennial State.
This guide explores what you should know about business loans in Colorado, including the available options, pros and cons, and application process, to help you decide. Specifically, we’ll answer these questions and more:
Coloradans can access various business loan program options to fund their operations.
Working Capital Loans: Working capital loans in Colorado provide financing to cover a business’s day-to-day operational expenses. Typical uses of working capital loan funds include inventory purchases, payroll, rent, and other short-term financial needs. They provide the cash flow to keep operations running smoothly and seize economic opportunities. Working capital loans are typically easier to qualify for than other business loans, making them a popular choice for small businesses needing quick funding.
Business Line of Credit: A business line of credit in Colorado is a flexible financing option that allows small businesses to access funds as needed. Instead of a lump sum payment, funds for a business line of credit are activated as an available credit limit. A revolving line of credit works similarly to a credit card, where you can borrow and repay funds as needed and only pay interest on the amount you use. This type of financing is ideal for covering short-term expenses, managing cash flow fluctuations, or seizing growth opportunities without applying for a new loan each time.
Revenue-Based Financing: Revenue-based financing in Colorado is a form of alternative small business funding where the company’s revenue determines eligibility and amounts. Repayment comes directly from a percentage of future revenue. This type of financing allows businesses to access capital without taking on additional debt, making it an attractive option for companies with fluctuating revenue streams.
SBA Loans: SBA loans provide funding to help businesses start, grow, and succeed. The Small Business Administration (SBA) partially guarantees these loans, providing security for lenders and allowing small businesses better access to capital. These partially guaranteed loans offer favorable terms such as lower interest rates and more extended repayment periods than traditional bank loans, making them an attractive option for a CO small business owner. An SBA loan in Colorado can be used for various purposes, including working capital and equipment purchases. SBA 504 loans fund commercial real estate and other major fixed assets.
Invoice Factoring: Invoice factoring in Colorado is an alternative business funding option in which a business sells its accounts receivable to a third party at a discount. This provides immediate cash flow, allowing the business to cover expenses or invest in growth without waiting for customers to pay their invoices. The factoring company then collects the total amount from the customers directly.
Merchant Cash Advance: A merchant cash advance (MCA) in Colorado is a form of financing where a business receives a lump sum of money upfront in exchange for a percentage of future credit card sales. Small businesses with fluctuating revenue streams or those needing quick access to capital typically use this type of funding. While merchant cash advances can provide fast funding, they often come with high fees and may not be suitable for all businesses.
Business Term Loan: Business term loans in Colorado are a type of financing in which a business borrows a lump sum and repays it with interest over a set period, with fixed interest rates and consistent monthly loan payments. These loans are typically long-term financing, but there are also short-term business loans. Businesses usually use term loan proceeds for significant investments like equipment purchases, paying off existing business debt, purchasing commercial real estate, or business expansion projects. The interest rates and terms of business term loans can vary depending on the lender and the borrower’s creditworthiness.
Equipment Financing: Equipment financing in Colorado is a type of small business loan specifically used to purchase equipment and machinery for operations. Equipment loans allow businesses to acquire necessary assets without draining their cash reserves. Typically, the financed equipment serves as collateral for the loan, making it easier for companies to secure funding.
Asset-Based Loans: Asset-based loans (ABL) in Colorado allow small businesses to unlock the value of the assets on their balance sheet to secure funding. ABL lenders have business assets appraised and then issue loan amounts based on the appraisal value. The assets become collateral for the loan, meaning the lender can claim the assets in case of default. Some examples of asset-based business loans include commercial real estate loans, certain construction loans, secured term loans, and accounts receivable financing.
Colorado offers various specialized lending programs. These programs support business owners in underserved communities. Government agencies, nonprofit lenders, and community lenders often collaborate to provide diverse financing options to meet the unique needs of businesses.
The Colorado Enterprise Fund (CEF) was established in 1976 to support small businesses in Colorado that may face challenges in obtaining traditional financing. CEF offers a variety of loan products, including term loans, lines of credit, and commercial real estate loans, with amounts ranging from $1,000 to $1 million.
In addition to providing financial assistance, CEF also offers business advisory services to help entrepreneurs strengthen their business operations and improve their chances of success. By focusing on improving the financial health of small businesses, CEF not only helps individual entrepreneurs but also contributes to job creation and economic growth in the local community.
The Colorado Startup Loan Fund supports new businesses by offering loans for startups that need working capital. Entrepreneurs can access funds ranging from $5,000 to $50,000.The Fund aims to drive economic development in the state. New and existing businesses can use the funds for various purposes, including equipment, hiring staff, and working capital.
The Colorado State Legislature appropriated the Fund following the pandemic. The CEF partners with the Colorado Office of Economic Development and International Trade (OEDIT) to facilitate the program. In addition to startup loans, some approved businesses may qualify for additional funding through a grant equal to 20% of the loan amount. Eligible businesses must be based in Colorado, for-profit, have fewer than 25 employees, no more than two years in operation, and have less than $2 million in annual revenue.
DreamSpring is a nonprofit CDFI and SBA lender offering customized financing solutions. It focuses on underserved entrepreneurs and small businesses and provides business lines of credit, business term loans, SBA Community Advantage Loans, and commercial real estate loans. DreamSpring also provides business navigation services to help clients succeed.
B:Side Fund, formerly Colorado Lending Source, supports small businesses with flexible funding programs. The mission-based nonprofit lender focuses on the Four Corners region, financing businesses in underserved communities in Colorado, Utah, Arizona, and New Mexico. It provides funding through a combination of grants, investment programs, and loans.
Colorado Enterprise Development Services (CEDS Finance) is a mission-based nonprofit lender focusing on business funding for underserved communities. It launched in 2009 to serve refugees and immigrants but has since expanded its scope to include women- and minority-owned businesses. It’s also the only Islamic-compliant lender in the state.
CEDS offers three primary funding programs:
Colorado Loans to Increase Mainstreet Business Economic Resiliency (CLIMBER) is a valuable initiative aimed at supporting underserved small businesses in Colorado. This program provides working capital loans between $10k and $50k with below-market interest rates to help entrepreneurs and business owners navigate financial challenges and boost economic resiliency.
The program is a collaboration between the Colorado General Assembly, the Governor, the Treasurer, OEDIT, CHFA, and the CLIMBER Oversight Board. It partners with various lenders, CDFIs, and nonprofit lenders to facilitate the funding.
The Colorado Housing and Finance Authority (CHFA) helps small business owners with commercial real estate loans and provides funding for manufacturers and nonprofit organizations. CHFA participates in the EPA’s Brownfields Revolving Loan Fund, which aims to finance the cleanup of contaminated commercial sites.
| LOAN TYPES | MAX AMOUNTS | RATES | SPEED |
|---|---|---|---|
| Merchant Cash Advances | $7.5k – $1m | Starting at 1-6% p/mo | 1-2 business days |
| SBA Loan | $50k-$10m | Starting at Prime + 2.75% | 8-12 weeks |
| Business Term Loan | $10k to $5m | Starting at 1-4% p/mo | 1-3 business days |
| Business Line of Credit | $1k to $250k | Starting at 1% p/mo | 1-3 business days |
| Receivables/Invoice Financing | $10k-$10m | Starting at 1% p/mo | 1-2 weeks |
| Equipment Financing | Up to $5m per piece | Starting at 3.5% (SBA) | 3-10+ business days |
| Revenue Based Business Loans | $10K – $5m | Starting at 1-6% p/mo | 1-2 business days |
Colorado has a strong and diverse economy. Small businesses play a vital role in this economy. They create jobs and foster growth. Many small businesses thrive due to the state’s unique landscape and resources. Colorado’s economy benefits from various industries that contribute significantly to its growth.
Here are some of the most prominent industries in Colorado:
The technology sector is booming in Colorado. It includes software development, cybersecurity, and data analysis. Cities like Boulder and Denver attract tech startups. These companies drive innovation and create many job opportunities.
Tourism is vital for Colorado’s economy. The state draws millions of visitors each year. People come for its stunning mountains, national parks, and ski resorts. This industry supports hotels, restaurants, and outdoor activities, creating numerous jobs.
Agriculture remains a cornerstone of Colorado’s economy. The state produces crops like corn, wheat, and barley. Livestock farming is also significant here. Local farms help sustain diverse communities by providing fresh produce and jobs.
Healthcare is a rapidly growing industry in Colorado. Hospitals and clinics provide essential services to residents. The state focuses on health innovation through research institutions. This sector employs thousands of workers across various roles.
Colorado is a hub for the aerospace industry, with companies like Lockheed Martin and Ball Aerospace leading the way. The state’s skilled workforce, research institutions, and favorable business environment have made it a top destination for aerospace companies looking to innovate and grow.
This industry in Colorado is a significant sector, focusing on extracting resources such as minerals, natural gas, and oil. It plays a crucial role in the state’s economy and energy production.
Small business loans in Colorado offer numerous benefits to entrepreneurs looking to start or grow their businesses. The primary advantage is access to capital, which can help cover startup costs, expand operations, purchase equipment, or hire additional staff.
These loans also provide flexibility in terms of repayment options, allowing businesses to choose a repayment schedule that aligns with their cash flow. Additionally, obtaining a business loan can help establish and build credit for the business, making it easier to secure financing in the future.
Another benefit is the potential for tax deductions on interest payments, which can help lower the overall cost of borrowing. Furthermore, by securing a business loan, entrepreneurs can maintain full ownership and control of their company without giving up equity to investors.
Small business loans in Colorado have several drawbacks that entrepreneurs should consider before applying. One disadvantage is the high interest rates often associated with these loans, which can significantly increase the overall cost of borrowing.
Additionally, some lenders may require personal guarantees or collateral, putting the business owner’s personal assets at risk if the loan cannot be repaid. Another drawback is the strict eligibility criteria that some lenders impose, making it challenging for newer or smaller businesses to qualify for funding.
Moreover, the lengthy application process and paperwork required for business loans can be time-consuming and cumbersome for busy entrepreneurs. Lastly, taking on debt through a business loan can also limit a company’s financial flexibility and potentially hinder future growth opportunities.
The application’s required paperwork depends on your chosen Colorado business loan. Funds can be approved and distributed for most products within three business days.
Here’s how to apply:
The first step is choosing the most sensible solution to the problem at hand. This should require a decent amount of research, as each product is designed for different types of expenses and cash flow cycles. Are you looking to cover a short-term or long-term cost? Is demand expected to increase or decrease in the coming months?
Considering the funds’ purpose will also help us determine the correct borrowing and terms for your needs.
Here are the documents and information required for all Colorado business loans:
SBA Loan options require additional documents and information, such as a business plan. Visit our SBA Loan page to learn what’s needed for the application.
You can begin the application process by calling us or filling out our one-page online application. Either way, you’ll be asked to enter the information from the previous section along with your desired funding amount.
Once you apply, a representative will contact you to explain the repayment structure, rates, and terms of your available options. This way, you won’t have to worry about any surprises or hidden fees during repayment.
If and when you’re approved, funds for Business Term Loans, Business Lines of Credit, Working Capital Loans, Equipment Financing, Merchant Cash Advance, Revenue-Based Business Loans, and Accounts Receivable Factoring should then appear in your business bank account in anywhere from 24 hours to one week. For SBA Loans, it usually takes 3-5 weeks (or more in some cases) to receive funding.
Your Colorado business loan isn’t just a way to get financing for your business. It’s also an excellent opportunity to start building (or improving) your credit.
Regardless of the type of business loan you get, make all your required payments on time and in full. If you get a business credit line or another form of revolving credit, keep your balance below the credit limit.
Consistently making your business financing payments on time and in full will positively impact your credit. And that means preferred rates and terms when you next need business financing.
If your application is declined, you might have applied for the wrong product for your cash flow. In this case, we would likely recommend a different product with a less hazardous repayment structure.
Your application might also be declined after it is determined that you cannot afford to take on more debt. Instead, your needs and financial circumstances might be better suited for another financing tool, like a business credit card or even a personal loan. Both options can be accessed through the UCS site and are usually much more accessible to qualify for than business loans.
If your credit score is preventing you from accessing financing, you should consider credit repair services. We can help you identify the issues that keep your score down and develop practical solutions for eliminating them.
Colorado business owners have many lenders to consider. Each option has its own benefits and challenges.
Banks and credit unions are traditional lenders. They often offer low interest rates on loans. However, it can be difficult for small business borrowers to qualify. Large national banks may have strict requirements. Local lenders like community banks and credit unions may be more flexible. These smaller institutions often understand the local market better and can provide personalized service to entrepreneurs.
Alternative lenders have changed the lending landscape. They use fintech tools to speed up the lending process, making them more accessible for small business borrowers. Many alternative lenders provide quick decisions and fast funding. However, they typically charge higher interest rates than traditional lenders. Entrepreneurs should weigh these costs against the benefits of faster access to funds.
Small business loan marketplaces (like UCS) are game-changers. They allow business owners to apply to a network of lenders with a single application, saving time and reducing stress. Owners can compare different offers easily. Some marketplaces even provide loan experts to help guide them through the process. This support helps ensure they choose the best option for their needs.
Community Development Financing Institutions (CDFIs) are essential in Colorado’s lending environment. These nonprofit lenders focus on providing financial services in underserved areas. CDFIs aim to help small businesses that might struggle with traditional financing options. They often offer lower rates and more flexible terms than other lenders. This support is crucial for rural business loan fund partners and entrepreneurs who need assistance.
Several government agencies partner with nonprofit and community development organizations to provide assistance to small business owners in Colorado.
The Colorado Office of Economic Development and International Trade (OEDIT) provides resources for startup businesses. It offers grants, loans, and tax credits to enhance economic development in the state and help businesses navigate the challenges posed by the pandemic.
The Colorado Small Business Development Center (SBDC) assists small business owners with training and advice. It also provides workshops on business planning and marketing strategies and connects entrepreneurs with funding sources. This support is vital for startups looking to grow.
Exponential Impact (XI) focuses on supporting innovative startups. It offers mentorship programs and funding opportunities and aims to create a strong startup community in Colorado. XI’s resources help entrepreneurs turn ideas into successful businesses.
Community Enterprise Development Services (CEDS Finance) provides financing options for local businesses. It focuses on underserved communities and offers flexible loan terms. CEDS Finance aims to encourage community development and economic recovery in Colorado.
SBA Offices in Colorado offer various assistance and training programs. They provide workshops on how to apply for loans and manage finances. These programs help small business owners develop essential skills. The SBA plays a crucial role in supporting the local economy.
The Rocky Mountain Microfinance Institute helps startup businesses access capital. Its focus is on low-income entrepreneurs who need financial support. Its services include micro-loans and business coaching. This organization empowers individuals to achieve their business goals.
Region 9 Economic Development District offers resources for small businesses in southwestern Colorado. They provide grants, loans, and technical assistance. Their goal is to promote economic development in the region, especially post-pandemic.
The Minority Business Office of Colorado supports minority-owned businesses. They offer resources, training, and networking opportunities. This office aims to improve economic conditions for diverse communities in Colorado.
Colorado offers various business grants to support small businesses. These funds help promising business start-ups and established companies grow. Different programs target specific industries and needs. Here’s a list of some notable grants available in Colorado.
Colorado offers various tax credits to support businesses. These credits can help reduce costs and improve business revenue. Here’s a list of some small business tax credits available in Colorado:
A low credit score limits financing options, but credit-challenged Colorado small business owners can still access needed capital with bad credit business loans. These specialized financing options focus on a business’s cash flow and growth potential more than the personal credit score of the business owner(s), increasing your chances of credit approval.
Several alternative lenders specialize in providing business financing for credit-challenged entrepreneurs. Online lenders offer easy online applications with minimal documentation, quick decisions, and fast funding, which benefits small businesses with urgent capital needs.
However, business loans for bad credit often carry high interest rates and increased fees. In addition, you may receive a lower maximum loan amount, have shorter repayment terms, and require more frequent repayment. These conditions can lead to further financial strain if not properly managed. Ensure you have a plan and budget before agreeing to a bad credit business loan.
A popular strategy for CO business owners is to use a bad credit business loan as short-term financing until their credit improves. With a better credit score, entrepreneurs can potentially access lower-cost, long-term loans and pay off bad credit business loan debt.
Navigating the world of business loans in Colorado can be a game changer for your venture. You have diverse options tailored to various industries and financial situations.
Understanding the advantages and potential drawbacks helps you make informed choices. Whether you’re looking for government assistance or exploring grants, there’s support available to help you thrive.
Contact us if you’re ready to start your Colorado business loan journey. Our alternative financing experts can help you find the most advantageous small business loans to fuel growth in the Centennial State.
Fraud Disclosure:
Please be aware that individuals have been fraudulently misrepresenting to business owners (and others) that United Capital Source, Inc. (“UCS”) can assist small businesses in receiving government grants and other forgivable business loans, when in fact those grants or loans do not exist or are not available. These individuals have ulterior motives and are engaging in the unauthorized use of the names, trademarks, domain names, and logos of UCS in an attempt to commit fraud upon unsuspecting small business owners.
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