Indiana is an excellent state for small business entrepreneurship. With a diverse economy, skilled workforce, and business-friendly tax policies, Forbes ranked the Hoosier State as the #2 best state to start a business in 2024 (#1 in 2023).
However, many Hoosiers require business financing help, whether for startup costs, working capital, expansion projects, capital expenditures, or other purposes. Fortunately, Indiana provides ample small business loan opportunities. Knowing the available options and how they work is essential to choosing the best small business loan to move your Indiana business forward.
This guide explores what you should know about Indiana small business loans, including the benefits, drawbacks, and application process. Specifically, we’ll answer these questions and more:
Hoosiers can access various business loan programs to fund their operations.
Working Capital Loans: Working capital loans in Indiana 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 Indiana 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 Indiana 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 an IN small business owner. An SBA loan in Indiana 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 Indiana 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 Indiana 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 Indiana 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, 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 Indiana is a type of small business loan specifically used to buy machinery and equipment 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 Indiana 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.
Indiana supports small businesses through various financing options to help entrepreneurs grow. These specialized lenders and loan programs help support economic and job growth in the Hoosier State.
The Business Ownership Initiative (BOI) is the small business lending arm of the Indy Chamber. This Community Development Financial Institution (CDFI) offers business loans between $1,000 – $50,000 to businesses with at least six months of financials. It is also approved to offer SBA microloans. BOI loans have interest rates between 6% – 9%, with loan fees around 3%.
The Community Investment Fund of Indiana (CIFI) aims to boost local economies. This fund helps small businesses by providing loans between $25,000 and $250,000 that are often hard to secure elsewhere. It targets businesses in low-income areas. The goal is to create jobs and improve community welfare. By investing in small businesses, the fund helps stimulate economic growth in Indiana.
Build Fund from Intend Indiana is vital in supporting local businesses in Indianapolis. The Build Fund empowers entrepreneurs to expand their operations, create job opportunities, and contribute to the community’s economic growth by providing access to flexible and affordable loans. Through strategic partnerships and responsible lending practices, the Build Fund serves as a catalyst for sustainable development and long-term success for businesses in the region. With a focus on fostering entrepreneurship and innovation, the Build Fund is committed to positively impacting the local economy and enhancing the overall quality of life for residents in Indianapolis.
The Indiana Small Business Credit Initiative (SBCI) is a program designed to provide small businesses in Indiana with access to capital through loan guarantees and other financial assistance. This initiative aims to support the growth and development of small businesses in the state by helping them secure the funding they need to expand and create jobs. The SBCI partners with local lenders to offer flexible financing options to eligible businesses.
The Indiana Small Business Credit Initiative (SSBCI) offers two main programs:
USDA Business & Industry Loan Guarantees are available for Indiana businesses. These loans help improve the economy in rural areas. The USDA guarantees loans made by banks and other lenders. This reduces the risk for lenders, encouraging them to lend more money. Businesses can use these loans for various purposes like purchasing equipment or expanding operations.
| 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 |
Indiana has a strong and diverse economy and is known for its welcoming environment for small business owners. The cost of living is lower than in many other states, making it easier for businesses to thrive. Indiana also has a skilled workforce and good transportation networks, which help businesses grow and succeed.
Several vital industries stand out in Indiana. Each industry plays a significant role in the state’s economy.
Here are some of the most prominent industries in the Hoosier State:
Manufacturing is the largest industry in Indiana. It employs hundreds of thousands of people. Factories produce cars, machinery, and chemicals. Several significant manufacturing companies are located in the state.
Agriculture is another important industry. Indiana produces corn, soybeans, and livestock. Farms cover about 15 million acres of land. The state ranks high nationally for these products.
Indiana’s healthcare and pharmaceutical industry is significant, with major players like Eli Lilly headquartered in the state. Indiana companies focus on research, development, and manufacturing pharmaceutical products.
Indiana’s location is ideal for transportation and logistics. Major highways and railroads connect the state to others. Companies benefit from quick shipping options. FedEx and UPS have large facilities here.
The technology industry is expanding in Indiana. Startups and established companies focus on software development and IT services. Cities like Indianapolis have tech hubs that attract talent.
Finance plays a vital role in Indiana’s economy, too. Many banks and investment firms operate in the state, offering services to individuals and businesses alike.
Small business loans in Indiana offer several advantages to entrepreneurs looking to grow or start their businesses. One key benefit is access to necessary funding to cover startup costs, purchase equipment, hire staff, or expand operations.
These loans can provide a financial cushion during slow periods or unexpected expenses, allowing businesses to stay afloat and continue operating smoothly. Additionally, small business loans can help improve credit scores by establishing a positive payment history when repaid on time.
They also offer flexibility regarding repayment schedules and interest rates, making them a customizable financing option for businesses of all sizes. Furthermore, securing a business loan can help establish credibility with suppliers, partners, and customers, demonstrating financial stability and commitment to growth.
Small business loans in Indiana come with several disadvantages that business owners must consider. First, the interest rates on these loans can lead to increased costs over time. Additionally, some lenders may require collateral, putting business assets at risk if the loan cannot be repaid.
The application process for business loans can also be lengthy and complex, requiring extensive documentation and financial information. Furthermore, if a business cannot repay the loan, it can negatively impact the business owner’s credit score, making it harder to secure financing in the future.
Some lenders may have strict repayment terms, including high monthly payments, which can strain a small business’s cash flow. While business loans can provide much-needed capital, they also have significant drawbacks that should be carefully considered before taking on debt.
The application’s required paperwork depends on your chosen Indiana 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 Indiana 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 Indiana 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.
Indiana business owners have a diverse range of lenders to consider.
Traditional lenders include banks and credit unions. These conventional financial institutions often provide large borrowing amounts with low interest rates. However, they have strict eligibility requirements that can exclude many small businesses. Applicants typically need excellent credit, several years in business, substantial revenue, and high-value collateral.
Hoosiers can choose between large national banks or local banks and credit unions. National banks typically have larger credit facilities but can be impersonal and have stricter qualifications. Local lenders frequently provide more personal service and better understand the local market. Some local lenders of note in Indiana include Purdue Federal Credit Union, IU Credit Union, and Community First Bank of Indiana.
Alternative business lenders have changed the landscape of business funding in Indiana and across the nation. These financial platforms, which include online lenders, nonbank lenders, and peer-to-peer lending services, provide a valuable alternative to traditional funding sources and improve access to capital for small business owners.
Most alternative lenders have lower qualifications than banks or credit unions. In addition, they often provide convenient online applications with minimal documentation. Using fintech tools, alternative lenders can make quick decisions and provide fast funding. Some lenders even offer same-day funding. The tradeoff for the increased speed and accessibility is that alternative business loans may have higher interest rates. Even so, many IN small business owners turn to alternative lenders when the banks say no.
Small business loan marketplaces are a game-changer for finding funding in Indiana. Like online lenders, marketplaces typically offer quick and easy online applications. However, instead of applying to one lender at a time, business loan marketplaces allow you to access a network of lenders with a single application. This convenience reduces time and stress by providing small business owners with multiple funding options.
Some marketplaces also use a concierge where applicants can connect with business loan experts who can guide them through their available options. These loan executives get to know your business to help you select the best option to achieve your goals while ensuring your cash flow can handle the repayment process.
Community Development Financial Institutions (CDFIs) in Indiana play a crucial role in providing financial services to underserved communities and businesses. These organizations focus on promoting economic development, creating jobs, and supporting affordable housing initiatives in the state.
CDFIs in Indiana work closely with local communities to address their specific needs and help stimulate growth and prosperity. Through their targeted efforts, CDFIs contribute significantly to the overall economic well-being of Indiana residents.
Indiana offers various support systems for small businesses. These programs help entrepreneurs secure funding and resources. They aim to boost local economies and create jobs.
Indy Chamber plays a vital role in supporting small businesses in Indiana. This organization provides access to resources, networking opportunities, and educational programs. It also offers financial assistance through various loan program options. Its goal is to help businesses thrive in the Indianapolis area.
The Economic Development Corporation (EDC) focuses on enhancing economic growth in Indiana. It works with local businesses to provide funding options and incentives. EDC also helps companies expand or relocate by offering grants and loans. This support is essential for creating jobs and improving community welfare.
Another key player is the Indiana Small Business Development Center (SBDC). SBDC offers free business consulting services to small business owners. It assists with business planning, marketing strategies, and financial management and also provides training sessions on various topics relevant to entrepreneurs.
The Small Business Administration (SBA) has offices throughout Indiana. These offices help small businesses access capital, technical assistance, and resources. Their services are crucial for entrepreneurs seeking to start or grow their businesses. You can typically find SBA loan options as well, such as finding an SBA-preferred lender.
Local agencies and nonprofits also support small businesses in Indiana. Organizations like SCORE offer mentoring services to entrepreneurs and connect experienced volunteers with business owners needing guidance. Local chambers of commerce provide networking events and resources, too. They help businesses connect with each other and share valuable information.
Indiana offers various business grants to support small businesses. These programs help entrepreneurs turn their ideas into reality. They provide funding that does not need to be repaid.
Here’s a list of some critical small business grants available in Indiana:
Indiana offers various tax credits to support small businesses. These credits help reduce tax burdens and encourage growth.
Here are some key tax credits available for businesses in Indiana:
A low credit score limits financing options, but credit-challenged Indiana 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 IN 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.
Business loans in Indiana offer various options tailored to your needs. From specialized financing to government assistance, you have plenty of resources at your fingertips.
Understanding the advantages and disadvantages helps you make informed decisions. You can navigate the application process with confidence, even if you’re facing credit challenges.
Contact us if you’re ready to start your Indiana small business loan journey. Our plan experts can help you find the best options to fuel growth in the Hoosier 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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