South Dakota features a very business-friendly environment with low taxes, a central location, and simplified regulatory policies. Small businesses play a vital role in the economy of the Mount Rushmore State.
However, many small business owners in South Dakota require financing help. While entrepreneurs can access diverse small business loan options, choosing the best loan for your needs, qualifications, and cash flow is crucial for success.
This guide explores what you should know about South Dakota small business loans, including the available options, pros and cons, and the application process. Specifically, we’ll answer these questions and more:
South Dakotans can access various business loan program options to fund their operations.
Working Capital Loans: Working capital loans in South Dakota 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 South Dakota 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 South Dakota 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 an SD small business owner.
An SBA loan in South Dakota 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 South Dakota 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 South Dakota 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 South Dakota 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. Loan terms can vary.
Businesses usually use term loan proceeds for significant investments like equipment purchases, paying off existing business debt, commercial property purchases, or a business expansion project. 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 South Dakota 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 South Dakota 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.
South Dakota offers several specialized programs to help small businesses access affordable financing, particularly those that face challenges securing traditional business loans.
These programs aim to foster economic growth and entrepreneurship by providing accessible funding solutions tailored to the unique needs of South Dakota’s business community.
GROW South Dakota offers various programs to assist small businesses with loans, technical assistance, and community development resources.
These programs support entrepreneurs by providing funding for business startup costs, expansions, and operations, helping drive economic vitality in rural and underserved areas.
MicroLOAN South Dakota provides small, low-interest loans for businesses needing up to $100,000 in financing.
The program caters to entrepreneurs and small businesses, helping them cover startup expenses, working capital, and equipment purchases. Its goal is to stimulate small business growth and sustainability across the state.
The South Dakota Works program offers flexible financing options for businesses seeking working capital, equipment purchases, or expansion funding.
With lower interest rates and adaptable terms, this program helps businesses of all sizes access the financial support they need to succeed and grow in South Dakota.
The REDI Fund is a low-interest loan program designed to encourage business development and job creation in South Dakota. Businesses can use the funds to purchase land, construct facilities, or acquire equipment.
The program emphasizes creating quality employment opportunities and fostering economic development in the state.
The USDA Business & Industry Loan Guarantee program provides financial backing to rural businesses in South Dakota.
By reducing lender risks, this program helps businesses secure the capital needed for growth, modernization, and operational improvements, supporting economic development in rural communities. Eligible uses include purchasing and developing land, installing machinery and equipment, and much more.
| 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 |
South Dakota’s economy is diverse, with a strong emphasis on agriculture, tourism, and manufacturing. The state offers a thriving environment for small businesses, supported by its favorable tax climate and access to specialized funding programs.
Here are some of the most prominent industries in South Dakota:
The backbone of South Dakota’s economy, producing crops like corn, soybeans, and wheat, as well as livestock such as cattle and hogs.
Attracts millions of visitors annually to landmarks like Mount Rushmore, the Badlands, and the Sturgis Motorcycle Rally.
This includes food processing, machinery, and metal fabrication, contributing significantly to the state’s GDP.
Features a growing network of hospitals and clinics, providing essential services and employment opportunities.
Home to major financial institutions, including credit card and banking operations.
South Dakota is a leader in wind energy, contributing to the state’s sustainable development and energy independence.
South Dakota business loans provide valuable opportunities for entrepreneurs and small businesses to access the capital needed to fuel growth, whether for expanding operations, purchasing equipment, or increasing working capital.
The state offers diverse loan options tailored to different business needs, ranging from microloans for startups to more extensive financing programs for established companies.
Many of these loans come with competitive interest rates, making borrowing more affordable. Additionally, securing a business loan can help build business credit, which is crucial for future financing opportunities.
Beyond financial benefits, working with local lenders and economic development programs often provides networking opportunities and access to resources that can help businesses thrive in South Dakota’s vibrant economy.
While business loans in South Dakota offer many advantages, they also have potential drawbacks. Borrowing money creates debt, which can strain a company’s cash flow due to interest and repayment obligations.
Traditional lenders often have stringent qualifications, making it difficult for startups or businesses with limited credit history to secure funding. Many loan programs require collateral, putting business assets at risk, and personal guarantees may further expose the borrower’s personal assets.
Additionally, the risk of late payments or loan defaults can damage a business’s credit score, hindering future borrowing opportunities. These factors can pose significant challenges for small businesses in South Dakota, especially those with limited financial resources.
The loan application process and required paperwork depend on your chosen South Dakota 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 South Dakota business loans:
SBA Loan options require additional documents and information, such as business tax returns, financial statements, and a formal 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 South Dakota 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.
South Dakota business owners can access various lenders, each catering to different financing needs.
Traditional lenders such as banks and credit unions offer some of the lowest interest rates and most stable loan terms. However, qualifying for these loans can be challenging, as they typically require excellent credit, several years in operation, strong annual revenue, consistent cash flow, and collateral.
Large national banks often provide access to substantial credit facilities but may lack a personal touch and primarily focus on larger commercial enterprises rather than small businesses.
In contrast, local banks and credit unions in South Dakota are often more flexible and better equipped to understand the local business landscape, providing tailored solutions to entrepreneurs in the state.
Alternative lenders have transformed the small business financing landscape by offering accessible and fast funding options. These lenders often feature convenient online applications, less stringent qualifications, and rapid approval processes, making them appealing to businesses needing quick capital.
Although interest rates tend to be higher than traditional lenders, many South Dakota business owners find the tradeoff worth it for the ease and speed of obtaining funding. These lenders are particularly beneficial for startups or businesses with less-than-perfect credit that might struggle to qualify for bank loans.
Small business loan marketplaces (like UCS) have been game changers for entrepreneurs in South Dakota. These platforms streamline the financing process by allowing business owners to submit a single application to a network of lenders. Approved businesses can then compare multiple funding offers to choose the option that best suits their needs and cash flow.
Many marketplaces also feature a concierge approach, where applicants are paired with lending experts who guide them through the process, ensuring they select the most advantageous financing option. This efficiency saves business owners time and stress, making marketplaces popular.
CDFIs are specialized lenders dedicated to supporting underserved businesses and communities in South Dakota. These institutions often provide flexible loan terms and technical assistance to help small businesses succeed. With a mission to promote economic development and job creation, CDFIs are an excellent option for entrepreneurs who may not qualify for traditional loans or need smaller amounts of capital to launch or grow their businesses.
South Dakota provides small business assistance programs through various government and nonprofit organizations. These programs aim to support entrepreneurs by offering financial resources, training, and guidance to help businesses start, grow, and thrive.
The Governor’s Office of Economic Development offers programs focused on job creation, business expansion, and community development. These initiatives include grants, loans, and tax incentives designed to attract and retain businesses, foster innovation, and boost the state’s economy.
Grow South Dakota provides a range of programs to support small businesses, particularly in rural areas. Services include low-interest loans, technical assistance, and educational resources to help entrepreneurs navigate the challenges of running a business and access the resources they need to succeed.
The South Dakota SBDC offers no-cost business consulting, workshops, and resources to support entrepreneurs at every stage of their journey. From developing business plans and market research to financial analysis and loan packaging, the SBDC helps small businesses overcome obstacles and achieve their goals.
The South Dakota Regional Small Business Administration (SBA) Office connects local businesses to federal resources, including loan guarantees, disaster assistance, and government contracting opportunities. The office also provides training and counseling services to help entrepreneurs navigate the challenges of starting and growing their businesses.
Local organizations such as SCORE and chambers of commerce play a vital role in supporting South Dakota’s small businesses. SCORE offers free mentorship and business workshops, while chambers of commerce provide networking opportunities, advocacy, and resources to foster community-driven economic growth. These local resources help entrepreneurs build connections and access tools that can drive their success.
South Dakota small business owners have access to several grant programs that can provide essential funding they don’t have to repay. However, it’s worth noting that small business grants are highly competitive.
Here are some of the most sought-after business grants in South Dakota:
Small business credits help lower your tax burden, freeing up more capital for investment and growth. Many of these tax credits are designed to support job and economic growth.
A low credit score limits financing options, but credit-challenged South Dakota 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 SD 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 South Dakota can help your enterprise succeed, but knowing the options and how they work is crucial to avoiding business debt pitfalls. It is vital to find small business loan options that provide the necessary funding with a repayment structure conducive to your cash flow.
Consider getting offers from multiple lenders to compare loan amounts, interest rates, and repayment terms. This can help you find the best deal to take your company to the next level without breaking the bank.
Contact us if you’re ready to start your South Dakota business loan journey. Our alternative financing experts can help you find the most advantageous business loan to fuel growth in the Mount Rushmore 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.
UCS will never communicate with a prospective client on Facebook, Facebook Messenger, or any other type of social media. Further, any email communications will always come from an official UCS email address and not a Gmail, Yahoo, or other email domain. If you believe you have been contacted by someone posing as an employee of UCS, please email [email protected].
