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Finding the Best Banks for Small Business Loans in Your State

Finding the Best Banks for Small Business Loans in Your State

Starting or growing a small business often requires financing to get off the ground. Small business loans allow entrepreneurs to access the capital they need to launch their venture and cover expenses like equipment purchases, renovations, inventory, marketing, hiring employees, and more. With so many options to choose from, finding the right lender for your specific needs can feel overwhelming. This guide covers tips for locating the best banks for small business loans in your state.

Determine What Type of Loan You Need

The first step is identifying what type of small business loan best aligns with your needs and qualifications. The most common loan types include:

  • SBA Loans – Backed by the Small Business Administration, these loans help entrepreneurs who may not qualify for traditional financing. SBA guarantees portions of loans made by banks and other lenders to reduce their risk.
  • Business Term Loans – These provide lump sum payments with fixed monthly payments over 3-10 years. They can be secured or unsecured.
  • Business Lines of Credit – Revolving credit accounts allow access to cash as needed. Only pay interest on what you use.
  • Equipment Financing – Funding to purchase necessary equipment like machinery, vehicles, IT systems. Payments are made monthly.
  • Invoice Factoring – Sell unpaid invoices to get immediate access to cash flow needed to cover expenses.
  • Alternative Loans – Offered by online lenders and fintech companies. May have higher rates but quicker approvals.

Consider when you need funds, how much you need, intended use case, and your ability to qualify and repay.

Research Local Bank Options

Your location plays a key role in loan availability and terms. Focus your search on banks operating in your state or metro region.

Many national banks like Chase and Bank of America have small business lending programs. However, smaller regional and community banks are worth considering too.

  • Local banks may be more invested in the area’s economic health. They have insight into regional industries and specialties.
  • Loan decisions may be made faster since they don’t get sent to a remote corporate office.
  • Regional banks can tailor solutions to suit local small business needs.
  • Smaller banks aim to foster long-term relationships with business borrowers.

Ask other entrepreneurs in your industry or neighborhood for recommendations on banks they’ve worked with successfully. Or search online review sites like Yelp to see which banks come highly rated for small business lending in your location.

Compare Loan and Account Terms

As you research potential lenders, pay close attention to the types of loans offered, loan amounts, rates, fees, repayment terms, collateral requirements, and other specifications.

  • Loan Amounts – Each bank sets its own minimum and maximum limits for lending. Make sure their available range meets your needs.
  • Interest Rates – Rates vary greatly depending on factors like your credit rating, collateral, loan type, loan amount, and the lender. Compare APR across multiple loan quotes.
  • Fees – Beyond interest costs, look out application fees, origination charges, prepayment penalties, late fees, insufficient funds fees, etc. These can add up.
  • Repayment Term Length – Typical loan terms span 3-10 years. Longer terms mean lower monthly payments but higher interest paid over time.
  • Collateral Policy – Some loans require pledged business or personal assets to secure the loan in case of default. This lowers the lender’s risk.
  • Funding Speed – From application to funding, how fast can you get financing? Alternative lenders often provide faster access to capital.

Pay attention to differences across lenders that influence the true cost of borrowing and repayment burden. Don’t just look at interest rates. Do the math to calculate total costs in each loan scenario.

Submit Loan Applications

After thorough research and comparisons, you can narrow down the top contending banks to apply with. Be prepared with all required documentation like prior years tax returns, business formation documents, business plans, profit and loss statements, balance sheets, etc.

Many banks allow online loan applications for convenience. Otherwise, schedule meetings with business bankers or lending officers at your chosen banks. Ask questions and discuss your specific situation to determine if they can address your needs.

A best practice is to submit applications with 2-3 potential lenders rather than just applying with one. This creates some competition among them to earn your business. If one lender offers unfavorable terms or declines your application, you have backups in place.

Compare Offers and Negotiate Terms

Hopefully you’ll receive multiple loan offers to choose between. Do another round of comparisons, this time with actual loan quotes in hand. In addition to rates/fees, consider factors like customer service, application experience, and your overall gut feeling.

If you have strong offers from multiple lenders, you may be able to negotiate improved terms with one or more. Be prepared to politely push back on interest rates, fees, collateral policy, or other pain points. Offer to shift more of your banking relationship to them in exchange for better loan terms. If able, highlight better offers from competitors and ask them to match or beat them.

Select Best Option and Complete Loan Closing

After careful consideration of pros and cons and negotiating your best deal, the last step is proceeding with your chosen lender by accepting their loan offer. Schedule a closing meeting to sign loan agreements and disburse funds.

Remember that lending relationships can span many years. Endeavor to choose a financing partner that earns your trust and stands ready to support your enterprise over the long haul. Even after you close your first loan, continue nurturing this important relationship so you have an advocate ready to assist with future funding needs.

Top Banks for Small Business Loans by State

This table summarizes the best banks for small business lending broken down by state:

State Top Regional Banks Top National Banks Top Credit Unions
Alabama Regions Bank, BBVA, Cadence Bank Wells Fargo, Truist, PNC Alabama CU, Alabama Teachers CU
Alaska Northrim Bank, First National Bank Alaska Wells Fargo, KeyBank Credit Union 1, Alaska USA FCU
Arizona Western Alliance Bank, MidFirst Bank Chase, Wells Fargo Vantage West CU, Arizona FCU

While major national brands have name recognition, take time to research regional and local banks operating in your state. Credit unions specific to your industry or geographic area are also great options with competitive loan products. With an array of lenders eager to win your business, shop around for the best fit.

Finding the Right Lending Partner

Securing financing for your entrepreneurial endeavor can be challenging. But finding the right lending provider that understands your business and funding needs makes a big difference. Rather than just a transactional relationship, you want a trusted advisor who will be in your corner at every stage of growth.

We hope this guide gave you tips on locating the best small business loan banks in your local area. Do diligent research and get informed before committing to any loan product. If you invest time upfront finding an ideal lending match, it will pay dividends for your enterprise down the road. Reach out with any other questions on securing financing for your aspirations and making those business dreams a reality

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