Pennsylvania offers excellent small business opportunities as it is the fifth most populous state and sixth largest economy. A report from Drive Industry ranks the Keystone State as the seventh best for small business survival rates, the highest rank of states with a top-10 economy ranking.
However, PA small business owners often require financial assistance for startup costs, ongoing expenses, or growth and expansion plans. Fortunately, many business loans are available in Pennsylvania, including private loans from national or local lenders, nonprofit lenders, and government-backed financing programs.
This guide covers what Pennsylvania business owners should know about their small business loan options, including the pros, cons, and application process. Specifically, we’ll answer these questions and more:
Pennsylvanians can access various business loan programs to fund their operations.
Working Capital Loans: Working capital loans in Pennsylvania are a type of financing designed to cover a business’s day-to-day operational expenses. These loans often fund inventory purchases, payroll, rent, and other short-term financial needs. They can provide businesses with 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 PA small businesses needing quick funding.
Business Line of Credit: A business line of credit in Pennsylvania is a flexible financing option that allows small businesses to access funds up to a predetermined credit limit. It works similarly to a credit card, where you can borrow and repay funds as needed, only paying 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 Pennsylvania is a form of small business funding in which repayments are based on a percentage of the company’s 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 are guaranteed by the US Small Business Administration and provide funding to help businesses start, grow, and succeed. These loans offer favorable terms, such as lower interest rates and more extended repayment periods than traditional bank loans, making them an attractive option for small business owners. SBA loans in Pennsylvania can provide funding for various purposes, including working capital, equipment purchases, real estate acquisition, etc.
Invoice Factoring: Invoice factoring in Pennsylvania 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 in Pennsylvania is a form of alternative funding in which a business receives a lump sum of money upfront in exchange for a percentage of future credit card sales. Small businesses that can benefit from this type of funding include those with fluctuating revenue streams or those needing quick access to capital. 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 Pennsylvania are a type of financing where a business borrows a lump sum and repays it over a set period with a fixed interest rate and consistent monthly payments. These loans are ideal for small businesses looking to fund long-term investments like equipment purchases, business expansion projects, or commercial real estate acquisitions. 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 Pennsylvania is a type of small business loan specifically used to purchase equipment or machinery needed for operations. This form of financing allows businesses to acquire necessary assets without draining their cash reserves. Typically, the purchased equipment serves as collateral for the loan, making it easier for companies to secure funding.
Asset-Based Loans: Asset-based loans (ABL) in Pennsylvania 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 amount. 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, secured term loans, and accounts receivable financing.
Pennsylvania also offers specialized financing programs and government-backed loans to support the state’s economy, promote job growth, and accelerate community development.
The Pennsylvania Department of Community and Economic Development (DCED) offers various programs to help businesses obtain financing for equipment and working capital. The Office of Business Financing administers the program’s loans and grants. It provides a wide range of programs:
The Pennsylvania Capital Access Program (PennCAP) is a state-run initiative that helps small businesses in Pennsylvania secure loans by providing lenders with a guarantee on a portion of the loan amount. This program aims to reduce the risk for lenders, making it easier for businesses to access the capital they need to grow and thrive. PennCAP has been instrumental in supporting the growth of small businesses across the state and stimulating economic development.
The PA Industrial Development Authority offers various financing options to support economic development in Pennsylvania. These options include low-interest loans, tax-exempt bond financing, and loan guarantees to help businesses grow and create jobs in the state. By partnering with local financial institutions, the PA Industrial Development Authority provides access to capital for businesses of all sizes looking to expand or start operations in Pennsylvania.
The Pennsylvania Minority Business Development Authority (PMBDA) offers financing options such as low-interest loans, loan guarantees, and grants to support minority-owned businesses in the state. These financial resources aim to help minority entrepreneurs access the capital they need to start or grow their businesses, ultimately contributing to Pennsylvania’s economic development and job creation.
Financing and Technical Assistance (FINANTA) is a nonprofit organization that provides financial services and support to underserved communities in Philadelphia. It offers loans, financial education, and business development resources to help individuals and small businesses thrive. Focusing on empowering individuals through financial literacy, FINANTA plays a crucial role in promoting economic stability and growth in the community.
| 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 |
Pennsylvania has a diverse economy with many industries thriving in the Keystone State. As of 2018, PA ranked first in farmers’ markets, barrels of beer produced, food processing companies, hardwood lumber production, mushroom farms, and natural gas production. It also ranks first in potato chip manufacturing (producing 25% of the nation’s potato chips) and pretzel manufacturing (producing 80% of the nation’s pretzels).
Here are some of the most prominent industries in PA:
Pennsylvania has a strong manufacturing industry, especially in steel, machinery, and food processing. The state has six major manufacturing sectors: Philadelphia, Pittsburgh, Erie, Scranton, Wilks-Barre, and the Lehigh Valley.
The healthcare industry significantly contributes to Pennsylvania’s economy, with many hospitals and research institutions in the state.
Pennsylvania is a significant player in the energy industry, particularly in natural gas production and renewable energy sources like wind and solar power. It also continues to be one of the largest coal-producing states in the country.
Pennsylvania’s agriculture industry is diverse, focusing on dairy, poultry, mushrooms, potatoes, and fruits like apples and peaches.
Pennsylvania’s technology sector is growing, with companies specializing in software development, biotechnology, and robotics. It’s also home to telecommunications company Comcast.
Pennsylvania’s tourism industry is thriving, with attractions like Hershey Park, Philadelphia’s historic sites, and the Pocono Mountains drawing visitors worldwide.
Pennsylvania business loans offer quick access to capital, various loan options, and competitive interest rates. These loans support local entrepreneurs in managing daily operations, investing in new equipment, and expanding services. With lower interest rates than national averages, businesses can save on interest over time.
Economic development programs like PIDA provide additional funding opportunities for land purchases and equipment upgrades. Timely loan payments can improve credit scores, leading to better financing options in the future. Securing business loans also results in networking opportunities and increased confidence among customers and investors. Ultimately, these loans can drive job creation in Pennsylvania by supporting business growth and expansion.
Pennsylvania business loans present various disadvantages. High interest rates can make repayment costly, especially for small businesses. Lengthy approval processes can delay funding, causing missed opportunities.
The extensive paperwork required, including financial documents, can be overwhelming for business owners. Collateral is often necessary, risking valuable assets if repayment is not met. Strict usage requirements limit flexibility in fund utilization. Short repayment terms strain cash flow, affecting overall financial management.
Competition for funding leads to stricter lending standards, challenging new businesses or those with poor credit. Not all businesses qualify, as lenders prefer established companies with good credit scores, leaving startups and low-credit businesses with fewer funding options.
The application’s required paperwork depends on your PA business loans. Funds can be approved and distributed for most products in up to three business days. Here’s how to apply:
The first step is choosing the most sensible solution to the problem. 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 Pennsylvania business loans:
SBA Loans 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 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 PA 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 at this time. Instead, your needs and financial circumstances might be better suited for another financing tool, like business credit cards 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.
Pennsylvania small business owners have several lender options to consider for their financing needs.
Traditional lenders, such as banks and credit unions in Pennsylvania, typically offer business loans to entrepreneurs and small business owners. However, qualifying for a business loan from a traditional lender can be more challenging due to stricter eligibility criteria and collateral requirements.
National banks may have more stringent lending policies and may require a higher credit score, while local banks may offer more personalized service and flexibility in loan terms. It’s essential for business owners to carefully compare the options available from both types of institutions before applying for a business loan in Pennsylvania. Freedom Credit Union stands out as a local option for business owners in the Philadelphia region.
In Pennsylvania, alternative lenders, such as online lenders, offer a convenient option for businesses seeking funding. These lenders typically have more flexible qualification requirements compared to traditional lenders, making it easier for businesses to secure a loan. Additionally, alternative lenders often provide fast funding, allowing businesses to quickly access the needed capital.
However, it’s important to note that alternative business loans may have higher interest rates than traditional loans. Despite this, many businesses in Pennsylvania turn to alternative and online lenders for their speed and accessibility in obtaining financing.
Fintech business financing marketplaces (like UCS) provide a platform for small businesses to connect with various lenders and access funding options. These marketplaces utilize technology to streamline the loan application process, allowing companies to compare offers easily and choose the best financing option for their needs.
These platforms allow businesses to access various loan products, including term loans, lines of credit, and invoice financing. By leveraging technology and data analytics, small business loan marketplaces help PA small business owners secure the funding they need to grow and thrive.
Community Development Financial Institutions (CDFIs) in Pennsylvania are crucial in providing financial services to underserved communities and small businesses. These organizations promote economic development and financial inclusion in areas where traditional banks may not lend. CDFIs in PA often offer affordable loans, financial education, and other resources to help support local economic growth and stability.
PA offers several government agencies and programs to assist small business owners.
As mentioned above, the PA Department of Community and Economic Development (DCED) plays a crucial role in supporting small business owners in Pennsylvania. Through various programs and initiatives, the DCED aims to provide resources and assistance to help small businesses thrive and grow. One key way the DCED supports small businesses is through financial assistance programs, such as grants and loans, which can help with startup costs, expansion, or other business needs.
Additionally, the DCED offers technical assistance and training programs to help small business owners develop their skills and knowledge to succeed in today’s competitive market. Overall, the DCED is a valuable resource for small business owners in Pennsylvania looking to start or grow their businesses.
The Pennsylvania Small Business Credit Initiative (SSBCI) is a program designed to support small businesses in the state by providing access to capital. Through SSBCI, eligible businesses can receive loans, loan guarantees, or investments to help them grow and expand. This initiative aims to stimulate economic development and create jobs by assisting small businesses in securing the funding they need to thrive.
By partnering with financial institutions and other lenders, SSBCI helps bridge the gap between small businesses and traditional financing sources, making it easier for entrepreneurs to access the capital necessary for success. Through the Pennsylvania SSBCI program, small businesses have the opportunity to achieve their goals and contribute to the overall economic prosperity of the state.
The Small Business Administration (SBA) has several offices in Pennsylvania that provide valuable resources and support to small business owners. These offices offer assistance with business planning, access to funding opportunities, guidance on navigating government regulations, and training programs to help entrepreneurs succeed.
Additionally, the SBA offices in PA can help small business owners connect with local resources, such as Small Business Development Centers and SCORE chapters, to further enhance their business growth. Whether you are just starting or looking to expand your existing business, the SBA offices in Pennsylvania are a valuable resource to help you achieve your goals.
Many business grants exist in Pennsylvania. These grants help support local businesses and promote economic growth. They provide accessible funding for various needs. Here’s a list of some essential grant programs available in the state.
Eligibility requirements differ among these programs. Businesses must typically meet specific criteria based on size, location, or industry sector. Before applying, it is essential to check each grant program’s specific guidelines.
Pennsylvania offers various tax credits to support businesses. These incentives help companies save money and grow. Here are some of the leading tax credits available in PA:
Some small business owners in Pennsylvania struggle to qualify for business loans due to a low credit score. However, bad credit business loans allow these credit-challenged business owners to access much-needed capital.
Alternative lenders are the primary source for business loans with bad credit. They offer easy online applications, quick approvals, and fast funding, which helps small businesses with urgent funding needs.
However, most business loans for bad credit come with higher interest and fees, shorter repayment terms, and require more frequent repayments. In addition, bad credit business loan lenders typically focus more on your cash flow, so your business likely needs robust revenue to qualify. These loans may also require collateral or a personal guarantee.
Some PA small business owners use bad credit business loans as temporary financing. They can provide funding for urgent needs and possibly help repair credit with timely payments. Some PA entrepreneurs also use credit building services. Once credit improves, business owners could potentially qualify for more advantageous business financing and pay off the bad credit business loan.
Navigating business loans in Pennsylvania can be a game-changer for your venture. You have various options, from traditional loans to specialized financing. Understanding the pros and cons is critical to making the right choice.
Whether you’re in a booming industry or facing credit challenges, help is available. Take advantage of government programs, grants, and tax credits designed for you. Your journey starts with knowing your options and acting on them. Contact us if you’re ready to see your PA business loan options.
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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