Small Business Loan Options in South Carolina

Nearly 445,000 small businesses call South Carolina home, and together they employ nearly 831,000 people, according to the SBA Office of Advocacy. A driving force behind the state’s economy, these business owners need all the help and support they can get.

Small business loans can help facilitate small business growth. But with so many choices, they can also be confusing. Here we’ll explore financing options, grants and business resources for businesses based in the Palmetto State. 

How a small business loan can help your South Carolina small business

Facebook’s September Global State of Small Business Report found that “73% of S.C. small business owners are confident in their ability to stay open for at least 12 months.” Ideally, every small business owner should not only feel confident they can stay open for 12 months, but can grow their business so they will succeed for many years to come.

Small business loans can help business owners with funding for a variety of needs, whether that’s hiring more workers or offering more competitive pay, repairing or buying equipment, investing in marketing campaigns or even just filling gaps in cash flow when customers or clients pay slowly. 

Types of small business loans to choose from

In 2019, large banks reporting loans under the Community Reinvestment Act issued $1.4 billion in loans to South Carolina businesses with revenues of $1 million or less. Total reported new lending to businesses through smaller loans of $100,000 or less was $1.3 billion, and total reported new lending to businesses through loans of $1 million or less was $3.5 billion, according to the SBA Office of Advocacy. While that may sound like a lot of loans, many businesses find it challenging to qualify for bank loans. 

Fortunately, there are many different types of small business loans to choose from today. Each one has its pros and cons along with unique eligibility requirements. Here we cover the main ones to give you a solid background as you look for financing for your South Carolina-based business.

Business credit cards

If you need to quickly get funds for your business, look into a business credit card. For those with good personal credit scores, business credit cards tend to be fairly easy to get. If you are approved, you have access to a line of credit you can tap as needed. Additional benefits of business credit cards may include perks such as cash back or travel rewards, some with sign-up bonuses. They also often help build business credit. Many card issuers offer business credit cards, so there is a wide range to choose from. 

Crowdfunding 

One of the funding options that is quickly growing and becoming more and more popular among business owners is crowdfunding. Crowdfunding comes in several different forms: loans, equity/investment, or products/rewards. There are many different platforms that facilitate crowdfunding, so take the time to find one that may be right for your business. Most accommodate startups as well as existing businesses, and credit checks are not common. 

Lines of credit

For many business owners, a line of credit is essential. It’s financing that’s there when you need it. The business gets approved to borrow up to a certain amount, then taps the line of credit as necessary. Once it’s paid back (partially or in full), you have access to those funds again. A line of credit is popular for short-term working capital needs. 

Term loans

Term loans can help entrepreneurs who know how much they need to borrow, and want to repay it over time. Some term loans carry repayment periods of 2—5 years, but others finance long-term projects and can be repaid over 20— 25 years. They may be available through traditional lenders as well as online lenders. 

Equipment financing or leasing

If your business needs equipment, you may want to look into equipment financing or leasing. This option is popular for businesses that are growing but don’t want to tie up a lot of money in equipment. Leasing may also come with valuable tax advantages. Plus if your equipment becomes outdated, it can be relatively easy to upgrade. 

Invoice factoring or financing

Businesses that invoice other businesses often struggle with cash flow. If your customers or clients pay slowly, you may want to look into invoice factoring or financing. Even if you don’t have a good credit score or have been turned down for traditional financing, you may be able to get this type of financing. It allows businesses to sell their invoices to another company at a discounted rate and get money relatively quickly. Alternatively, invoices may be used to collateralize shor-term loans. 

Commercial real estate loans

A commercial real estate loan is a very specific type of loan used to finance real estate. It may be used for acquiring a property, or for expanding or renovating an existing project. These loans are usually available through banks as well as commercial real estate lenders, and there are some SBA loans that may be used for real estate as well. 

Business cash advance

For small businesses with a history of strong sales, a business cash advance or merchant cash advance can be a very quick way to get financing. Past revenues will be analyzed and the business will be advanced funds against future expected revenues. Daily or weekly payments are often required to pay back the advance. This type of financing may not require good credit either. However, costs can be high so be careful when shopping around. 

Microloans 

Businesses looking for smaller loan amounts may want to look into microloans. These are often made by non-profit lenders that are trying to help spur economic development in a particular area. Many of these lenders work with underserved borrowers, such as minority, women or veteran-owned businesses. Loan amounts are often for several thousand dollars, and usually go up to $50,000 though some go up to $250,000. Additional benefits of microloans is that they usually have very little collateral required, they tend to come with mentoring, and they often have low interest rates. 

For example, LiftFund provides small business loans for women and minorities, as well as startups in Charleston, Columbia, and Mount Pleasant, and throughout South Carolina. And CommunityWorks provides small business loans starting at $1000 and up to $250,000. These are just a couple of microlenders providing funding within the State of South Carolina. See the Resources section below for more information. 

SBA Loans

The SBA loan program includes about ten different types of small business loans. Most SBA loans are made by financial institutions and guaranteed by the U.S. Small Business Administration. (Disaster loans are currently the only type of loan made by the SBA directly. You apply for Disaster loans at SBA.gov.) Whether you need a microloan or a more traditional loan, the SBA can help you understand your options and find the right loan for your business. The SBA can also help you with special loans such as a disaster relief loan. 

Small Business Loan Options for South Carolina

It can be helpful to find out what types of loans are available locally, but if you’re having trouble getting financing, you may want to cast a wider net. South Carolina small business financing options to consider include:

Lines of Credit

Term loans

Commercial real estate loans

Equipment financing and leasing

Invoice financing

Business cash advance

SBA Loans

What it takes to get approved for a small business loan

Each lender and type of financing will have its own qualification requirements. But in most cases, you can expect a lender to look at these main factors when evaluating a loan application: 

  • Business financials 
  • Credit scores
  • Time in business 
  • Industry

Business financials

Having your business finances in order for tax purposes, understanding your business financial health, etc. But it is also important when you want to get a loan. Lenders may want to review your financials to figure out how much they can safely lend.

Most lenders will require business bank statements to verify revenues. Some lenders— especially traditional lenders like banks— will also want to review business financial statements and/or business tax returns. Make sure to use a business bank account and to keep your bookkeeping up to date. 

Credit 

You may or may not be surprised to learn that your personal credit scores can affect your chances of getting a small business loan. Lenders often look at credit scores to help predict whether you will pay other loans on time. There are financing options above that don’t require good credit scores, but it’s a good idea to invest time to build good credit so you increase your options.

Age of business

Lenders want to try and make sure they are going to get paid back and businesses that have been around for two or more years are seen as relatively safe (given other criteria look good as well). Small businesses under two years are seen as riskier. That’s why startup loans are harder to find, though not impossible. If other qualifications are strong and you are close to the two year mark, lenders may still be open to lending to your business. 

Industry

While the industry your business is in may not seem very important, it can actually be the difference between you getting approved or denied a loan. Some industries are classified as “restricted industries” by lenders and they won’t give loans to firms in those industries. Unfortunately, businesses may be misclassified causing them to be turned down because of a clerical error, so check your NAICS or SIC industry codes on your business credit reports before you apply. 

How to choose the right loan for your South Carolina small business

Deciding on the right loan for your small business can be very intimidating. There can be many factors to consider, but a good place to start is with the following questions:

  1. How much do I need to borrow?
  2. How will I use the funds?
  3. How much can I afford in payments? 
  4. How will the cost affect the bottom line?

It’s never great to rush into a loan when you’re desperate for financing, so starting the search early will give you time to evaluate your options and choose the best loan for your business. 

Small business grants for South Carolina

Lots of entrepreneurs would love to get a small business grant. They offer funding that doesn’t require payments because they don’t have to be paid back. Most grants are highly competitive, some have a relatively long application process, and many offer a small amount of funding. This shouldn’t dissuade you from applying for grants; it should just dissuade you from trying to use small business grants as your primary financing for your business.

You can search for grants at Grants.gov (government grants), databases such as Opengrants.io or GrantWatch.com, or by visiting your local library to get help identifying resources. You can also tap the business resources listed below to learn about local or state grant opportunities. 

Additional resources for South Carolina small businesses

Running a business is not easy. There are numerous small business resources that can help. Don’t go it alone: take advantage of the many free services available to your business.

South Carolina Business One Stop

Start your search at South Carolina Business One Stop, offered by the state government. You’ll find the South Carolina Dept. of Commerce Resource Guide, information about the SC Division of Small and Minority Business Contracting and Certification (SMBCC) and the Small Business Administration and more. 

South Carolina Small Business Development Center

SBDCs offer private, free consulting to small businesses. With 21 SBDCs across the state, the South Carolina SBDC is a terrific resource. Whether you need help creating a business plan, getting into government contracting or exporting, or developing a marketing plan, your SBDC can help. They also put on free webinars and online classes to help their clients succeed. 

SCORE South Carolina

SCORE is another organization that provides free mentoring for your business. SCORE South Carolina has a number of chapters across the state. Services are free and confidential.

This article was originally written on March 8, 2022.

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