Small Business Loans in Delaware

According to the latest statistics, Delaware houses approximately 77,000 small businesses, which make up around 98% of Delaware-based companies. These enterprises employ a significant portion of the state’s workforce, making them a vital component of Delaware’s massive economy.

To stay competitive, companies must find a way to adapt to the current business landscape. They must develop creative marketing strategies to extend their reach, encourage conversions, and increase sales. Aside from that, they must provide excellent customer service, making it hard for their clients to resist their offers.

But these activities require a significant amount of capital, and some entrepreneurs might not have enough funds to finance said activities. In such cases, companies can consider applying for Delaware business loans to get the funds they need to grow and expand their companies.

Private medical practices are among the most prevalent businesses in Delaware. With tough competition, medical practitioners and business owners can take advantage of small business loans to take their business off the ground and stay ahead of their competitors. They can use the funds to fund equipment upgrades, market their private practices, or expand their current practice.

The wholesale and retail industries are prone to seasonal cash flow gaps. During the off-season, business owners may struggle to pay their employees, reorder inventory, and prepare for the busy season. That said, they often find themselves looking for a way to boost their capital and sustain their operations. And small business loans for Delaware-based businesses give them just that.

With the proceeds from the financing, they can stock up on inventory and prepare for the busy season. They can also use the money to bridge cash flow gaps during the off-season, pay their employees, and continue serving their clients. It’s safe to say that with enough financial resources, retail and wholesale owners can set their businesses up for success.

Tourism is a big part of Delaware’s economy. The First State houses the Dover International Speedway, popularly known as “Monster Mile,” which hosts two NASCAR races annually. Tourists can also find the famous Rehoboth Beach in Delaware, nicknamed the “The Nation’s Summer Capital” because of the number of people who visit each year for summer vacation. With that, it’s no wonder why hotels and other accommodations are highly in demand in the area.

Hoteliers can take advantage of hotel business loans to prepare their business for the peak season. They can use the funds to offer deals, market their hotel, upgrade their rooms, update their technology, or fund necessary equipment without draining their cash reserves.

While both banks and business loans offer financing options to help you with your business needs, it’s worth noting that both options have differences regarding the loan terms. As a business owner, you should know how each option works to make a more informed decision in the future.

Let’s explore each option below:

Banks and Credit Unions

Banks and credit unions, in general, offer the most affordable rates and flexible terms. But it has a specific downside: bank loans are among the most challenging options to qualify for. Traditional lenders also have a lengthy application process. In some cases, the turnaround time could be as long as three months. They’ll also ask for a long list of documents, including articles of incorporation, titles, manager resumes, and more, on top of the primary application documents.

At the very least, small business owners applying for a loan from the bank should have a credit score of at least 650, six-figure revenue, and two years of business history. They may also require collateral to secure the loan and ask the borrower to sign a personal guarantee agreement to add another layer of protection. That said, startup businesses or companies with a poor credit history might have difficulty qualifying for a bank loan.

However, once approved, businesses can take advantage of interest rates as low as 3%. Loan amounts can go up to $1 million (or more) with repayment periods of 10 to 20 years, depending on your qualifications.

Alternative Lenders

Conversely, alternative lenders may work with borrowers with less than stellar credit. Unlike banks, they’re not strict with their qualification criteria and do not require business owners to submit a laundry list of requirements. Many alternative lenders can approve loan applications in as fast as 24 hours, making them an excellent option for businesses looking for quick access to additional capital.

With that information, you might want to jump right on the alternative lending route, but know that the convenience and leniency of alternative lenders do come with a particular disadvantage. Alternative lenders charge higher rates and fees than traditional lenders. That is because they want to mitigate their risk when lending to high-risk borrowers, such as small businesses. Don’t be surprised to see an online lender that charges a 30% interest rate on their loans.

That is not to say that businesses can’t qualify for lower rates. An excellent credit score, solid financial track record, and a few years of business history significantly increase your chance of qualifying for business loans with favorable terms. If the business can pledge collateral, their chance increases even further. With that, you might want to negotiate the terms with the lender.

AB Funding offers a myriad of financing options for small businesses in Delaware. Some are tailored to address a specific need, while others can provide some flexibility. Whether you’re looking for additional capital to expand your business or meet a temporary cash-flow gap, we can offer the best loan option for every business need.

Here’s a quick rundown of the small business loan options available for small businesses:

Business Lines of Credit
A business line of credit works like a credit card, making it one of the most flexible forms of small business financing. Once approved, lenders will give you a credit limit, which you can withdraw funds as needed. The credit limit is based on your credit score, annual revenue, time in business, and more. Business lines of credit are a great option if you want continuous access to working capital without reapplying for a small business loan.

Business Term Loans
A business term loan is your classic financing structure. You’re given a lump sum that you need to repay within a fixed period, usually monthly or weekly. Terms loans are best for small businesses with long-term projects that require a significant amount of working capital.

The repayment terms depend on the type of term loan:

Short term loans: Under 2 years
Medium term loans: 2 to 5 years
Long term loans: More than 5 years
SBA Loans
The Small Business Administration created partially guaranteed SBA loans to help small businesses qualify for small business financing. By guaranteeing a portion of the loan (up to 85%), lenders will still get the guaranteed portion even if the borrower defaults on the loan.

SBA 7(a), SBA express loans, and microloans are the most popular options. Keep in mind that SBA-accredited lenders and banks offer these loans, not the Small Business Administration.

Invoice Factoring
Invoice factoring is for small businesses that can sell a portion of their unpaid invoices to a lending company. The lender can advance up to 80% to 90% of the total invoice value and collect customer payments on your behalf. You’ll then receive the remaining percentage minus a fee. It’s great for Delaware small businesses that need immediate access to funding.

Equipment Financing
Equipment financing gives small businesses the financial assistance necessary to purchase or lease equipment, such as company vehicles, heavy equipment, medical equipment, furniture and fixtures, and other tools a small business may need.

The equipment is the collateral, so you don’t have to pledge your personal and business assets. However, lenders may repossess the equipment if the borrower defaults on the loan.

Inventory Financing
Inventory financing uses existing inventory as collateral to secure additional working capital. Lenders can give you up to 80% of your inventory’s appraised value, and the repayment terms can be as long as three years. However, some lenders may limit it to a year. The terms, fees, and rates of this small business loan are based on several factors: profitability, credit score, inventory quality, customer base, and inventory churn.

This financing option is best for Delaware businesses with large quantities of inventory, such as retailers, wholesalers, and more.

Asset-Based Loans
Asset-based loans rely on the value of your assets rather than your cash flow and credit. You can use your inventory, accounts receivable, equipment, and machinery as collateral.

It’s easier for small business owners to qualify for an asset-based loan because the collateral mitigates the risk for the lenders. Asset-based financing is great for companies with highly liquid assets on their balance sheets.

Purchase Order Financing
Purchase order financing is best for rapidly growing companies that need working capital to pay suppliers and meet large purchase orders.

In PO financing, the lender will pay your suppliers to manufacture and deliver the products to your customers. Once dispatched, your customers will pay their dues to the lender, who will deduct their fees before sending you the remainder of the payment.

Remember that PO financing is only applicable to product-based companies that sell completed products, not those that sell services or materials.

Depending on the loan program, borrowers can get between $5,000 to $5 million in funding for their business.

Here are some resources you should check out if you own a small business in Delaware.

Small Business Alliance
A member of the Small Business Alliance can access exclusive networking events and referrals. Membership fees may also be tax-deductible.

Delaware Small Business Development Center
The Delaware Small Business Development Center (SBDC) offers free mentoring for small business owners. They can assist you in creating your business plan, marketing research, and strategy and help you find business growth opportunities.

Delaware SCORE
The Delaware SCORE offers valuable assistance to small businesses in Delaware, like informative webinars and mentoring.

Delaware Division of Business
You can find plenty of small business resources in the Delaware Division of Business. Hundreds of organizations offer support to many business owners in Delaware. Fill out a short online form on their website to get a list of organizations and resources that can assist you based on your needs and industry.

Delaware Prosperity Partnership (DPP)
The DPP is Delaware’s nonprofit economic development agency. They help Delaware small business owners retain and grow their companies and attract new businesses to the state.

Delaware Small Business Grants
Unlike a loan, small business grants are money or funding that you don’t need to repay. As good as it sounds, grants usually take time and effort. And if you qualify, there’s no guarantee that the money you’ll receive is enough to fund your small business.

But if you find a small business grant that fits your business, you’re welcome to apply.

The Delaware Division of Small Business awards EDGE grants to qualified businesses. STEM-based companies can receive up to $100,000 for eligible expenses, while non-STEM businesses or Entrepreneur Class can get up to $50,000.

As a small business owner, running a business is challenging. If you need help expanding your business, schedule a consultation with one of our loan specialists. They can walk you through small business loans in Delaware and help you determine which loan best fits your current needs.