Despite its smaller population and GDP, Hawaii offers various small business opportunities. However, its remote location and high cost of living can make it challenging to thrive in the Aloha State.
Fortunately, entrepreneurs in Hawaii can access various funding options to support launching and growing their businesses. Choosing the best business loan for your needs and cash flow is crucial to success.
This guide explores what you should know about business loans in Hawaii, including the best options, pros and cons, and the application process. Specifically, we’ll answer these questions and more:
Hawaiians can access various business loan program options to fund their operations.
Working Capital Loans: Working capital loans in Hawaii 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 most other types of business loans, making them a popular choice for small businesses needing quick funding.
Business Line of Credit: A business line of credit in Hawaii is a flexible financing option that allows small businesses to access funds as needed. Instead of a lump sum payment, funds for a small 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 Hawaii 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 program 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 conventional loans, making them an attractive option for a HI small business owner. An SBA loan in Hawaii can be used for various purposes, including working capital and equipment purchases. SBA 504 loan programs fund commercial real estate and other major fixed assets.
Invoice Factoring: Invoice factoring in Hawaii 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 Hawaii 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 Hawaii are a type of financing in which a business borrows a lump sum and repays it with interest over a set period, with a fixed interest rate and consistent monthly 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, commercial property purchases, 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 Hawaii 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 Hawaii 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.
Hawaii offers several state-specific funding and financial assistance programs to help small business owners.
CBED offers loans to eligible small businesses that contribute to economic development in their communities. Its mission is to help these enterprises grow into viable, sustainable ventures that meet local needs and align with their areas’ cultural values and vision. The program especially focuses on businesses involved in agricultural and food production, manufacturing, and wholesaling. Loan amounts typically range from $50,000 to $125,000.
To qualify, applicants must be registered businesses in Hawaii and demonstrate that the loan will lead to an economic development outcome. Additionally, applicants must show a rejection from at least one financial institution, have operated for at least two years, and possess the financial ability to repay the loan.
Loan funds can be used for various purposes, including working capital, facility construction or improvement, equipment purchases, and covering production and marketing costs such as materials, labor, and services. Loans have a term of up to 10 years and carry an interest rate between 3% and 6%.
The Mālama Loan Program, also called the Native Hawaiian Revolving Loan Fund (NHRLF), aims to expand financial opportunities for individuals of Native Hawaiian descent. This program enhances access to credit, capital, and essential financial services, promoting job creation, wealth building, and overall economic and social prosperity across Hawaii.
The Mālama Business Loan is the primary financing option for Native Hawaiian entrepreneurs, while the Hua Kanu Business Loan offers established small businesses the credit and capital needed to support growth and development.
| 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 |
With a population of about 1.4 million residents, Hawaii’s economy combines traditional and modern industries. Small businesses are crucial in this dynamic landscape, contributing significantly to the state’s economic vitality.
Here are some of the most prominent industries in Hawaii.
Hawaii’s tourism industry is the state’s most significant economic driver, attracting millions of visitors annually with its unique culture, scenic landscapes, and renowned hospitality. It supports local businesses, creates jobs, and significantly contributes to state revenue.
Agriculture in Hawaii includes diverse crops such as coffee, macadamia nuts, and tropical fruits. This industry sustains local food production, preserves cultural practices, and supports rural communities while focusing on sustainability and reducing dependency on imported goods.
Hawaii’s renewable energy sector is vital for reducing reliance on imported fossil fuels. With solar, wind, and bioenergy initiatives, the state leads in clean energy adoption, promoting environmental sustainability and moving towards 100% renewable energy by 2045.
The healthcare industry in Hawaii provides essential medical services to a diverse population. This sector focuses on improving access to care, addressing health disparities, and ensuring quality services for residents, including Hawai‘i’s elderly and rural communities.
Manufacturing in Hawaii supports local production of goods, ranging from food and beverage processing to apparel and high-tech equipment. The industry boosts the state’s economy by creating jobs and reducing the dependency on imports for local needs.
Hawaii’s technology sector is growing, focusing on innovation, cybersecurity, and telecommunications. It enhances connectivity across islands, supports various industries, and provides skilled job opportunities, driving economic diversification and modernization in the state.
Small business loans in Hawaii offer crucial benefits to help local entrepreneurs grow and sustain their businesses. Accessing capital enables business owners to invest in equipment, hire staff, and expand their operations, fueling economic growth in the state.
These loans come in diverse options tailored to specific needs, whether for startup costs, expansion, or short-term cash flow management. With competitive interest rates, small business loans provide affordable financing that can improve cash flow without burdening operations.
Additionally, by responsibly repaying loans, businesses can build a strong credit profile, making it easier to secure funding in the future. Many lending institutions in Hawaii also offer networking opportunities, connecting business owners with industry experts, advisors, and other entrepreneurs. This support network can open doors for further growth and partnerships, ultimately strengthening Hawaii’s small business ecosystem.
Business loans in Hawaii have several potential drawbacks that can create challenges for local businesses. The cost of debt can be particularly high due to Hawaii’s limited lender competition, which often drives up interest rates and increases the financial burden on small and new businesses with limited cash flow.
Additionally, traditional lenders tend to have strict qualification criteria, such as minimum credit scores, years in business, and revenue thresholds. Local businesses, especially those in high-risk or seasonal industries like tourism, may find it challenging to meet these standards.
Collateral requirements add to the risks, as many lenders require businesses to pledge assets like property or equipment. With Hawaii’s high property values, this could mean putting substantial business assets on the line, potentially leading to significant losses if the loan cannot be repaid.
Some lenders also require personal guarantees, which puts the business owner’s personal assets—such as homes or savings—at risk if the business defaults. This requirement is often challenging for small business owners who may lack a clear separation between personal and business finances.
Late payments or defaults can damage a business’s credit, making it difficult to secure future financing, especially considering the limited number of local lenders in Hawaii. Furthermore, Hawaii’s economy, heavily reliant on tourism, is vulnerable to economic fluctuations that can make it challenging for local businesses to maintain a steady income, increasing the risk of late payments or defaults.
The loan application process and required paperwork depend on your chosen Hawaii 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 additional information required for all Hawaii business loans:
SBA Loan options require additional documents and information, such as business tax returns, financial statements, and a business plan. Visit our SBA Loan page for further information and 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 Hawaii 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 loan 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 loan 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.
Hawaii business owners have various lender options available to meet their financing needs, each with unique benefits and trade-offs.
Traditional lenders, such as banks and credit unions, have long been a primary source of business funding, offering some of the lowest interest rates available. However, qualifying for these loans can be challenging.
Banks and credit unions typically require borrowers to meet stringent criteria, such as excellent credit scores, several years of business operation, high annual revenue, consistent cash flow, and valuable collateral. For larger loans, national banks tend to offer substantial credit facilities, although they may lack the personalized service that many small business owners value. Larger banks often focus more on commercial enterprises, sometimes making small businesses feel overlooked in the process.
In contrast, local lenders, including regional banks and credit unions, can provide more flexibility and a better understanding of Hawaii’s unique economic landscape. These local institutions may offer more tailored terms and personalized support, which can be especially helpful for small business owners facing the particular challenges of Hawaii’s economy.
Alternative lenders have significantly changed the small business financing landscape by offering flexible, accessible, and fast solutions for business owners who may not qualify for traditional loans. These lenders operate primarily online and provide streamlined applications that are often easier to complete and have more relaxed qualification requirements than traditional banks.
Alternative lenders may approve applicants with lower credit scores, shorter time in business, and less revenue, making financing available to a much broader pool of business owners. Funding decisions are made quickly, with funds often available within days, a convenience that can make a critical difference for businesses needing immediate capital.
While interest rates with alternative lenders tend to be higher than those from traditional lenders, many business owners find that the accessibility and speed are worth the added cost, especially when they need funds to seize a timely opportunity or address an urgent cash flow gap.
Small business loan marketplaces (like UCS) have been game changers for Hawaii business owners, providing a streamlined approach to the loan application process. These platforms allow business owners to submit a single, simple online application that connects them with a network of lenders, saving significant time and reducing the stress of applying to multiple lenders separately.
Approved businesses often receive multiple funding offers, allowing them to compare terms, rates, and other factors to choose the best option for their unique needs and cash flow requirements. Some loan marketplaces offer a concierge approach, connecting applicants with lending experts who guide them through the process, answer questions, and help select the best funding offer. For Hawaii business owners, these marketplaces provide a valuable tool to access various financing options without the need to navigate each lender’s requirements individually.
Community Development Financial Institutions (CDFIs) are an essential resource for Hawaii’s business owners, particularly those in underserved communities or industries. CDFIs are mission-driven financial institutions focused on supporting economic development and financial inclusion. They often provide small business loans with more flexible terms and qualifications than traditional banks. In Hawaii, CDFIs may focus on financing small businesses that benefit local communities, such as those in the agriculture, hospitality, and retail sectors.
Hawaii offers several government and nonprofit small business assistance programs.
The SBA Regional Office in Hawaii offers assistance programs to support small businesses, including access to loans, grants, and disaster relief funds. It also provides counseling and training to help entrepreneurs develop business plans, improve financial management, and expand operations.
Specialized programs target veteran-, women-, and minority-owned businesses, offering tailored resources and guidance. Additionally, the office helps connect small businesses with government contracting opportunities and facilitates recovery resources for businesses impacted by natural disasters in Hawaii and the Pacific Islands.
The Hawaii State Trade Expansion Program (HiSTEP) has a unique opportunity for businesses seeking to expand internationally. HiSTEP helps businesses grow their markets beyond local shores with export readiness programs, counseling, and training.
It’s a program designed to empower businesses wanting to explore international markets. It gives them the expertise and resources they need to succeed. HiSTEP’s export readiness programs prepare businesses with critical knowledge. These programs help companies build the skills to succeed in the world market.
The counseling and training sessions are tailored to address the unique challenges Hawaiian businesses face in the international marketplace. These customized programs enable entrepreneurs to succeed globally.
Hawaii’s Small Business Development Center (SBDC) is an invaluable resource for entrepreneurs seeking guidance and support. The SBDC offers various services, including business counseling, workshops, and training sessions, to enhance business acumen and increase operational efficiency.
These services empower business owners. They provide the crucial skills and knowledge needed to navigate the intricacies of running a business effectively.
The SBDC’s personalized counseling sessions, in particular, are tremendously helpful and offer tailored advice and strategies to overcome specific business challenges.
The workshops and training programs cover various topics, from financial management to marketing. They empower business owners with the latest industry insights and best practices.
Entrepreneurs can access several small business grants in Hawaii. Here are some of the top options to consider.
Here are some of Hawaii’s small business tax credits designed to promote economic growth and sustainability:
A low credit score limits financing options, but credit-challenged Hawaii small business owners can obtain financing 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 and lender 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 HI 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.
Hawaii business loans can help take your small business to the next level, but it’s crucial to understand the available options and how they work. Choosing the right loan for your business’s needs and financials can set you up for success and help avoid potential pitfalls.
Consider seeing loan offers from multiple lenders. Comparing borrowing amounts, rates, and terms can help you find the best deal to drive your company forward.
Contact us if you’re ready to start your Hawaii small business loan adventure. Our small business financing experts can help you find the best business loan to fuel growth in the Aloha 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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