How To Get A Small Business Loan in New York
How To Get A Small Business Loan in New York

Small business loans for New York City small businesses can come from many sources—from local government-guaranteed programs to national banks that lend especially well to NYC businesses, options abound for NYC business owners who need access to small business funding. There are plenty of choices for small business loans in New York City, and in the article, we will explain how to get the small business loan that is available.

Though small businesses in NYC can access loans through many national lenders, local NYC small business loans might feel more personalized and face-to-face. And, lucky for NYC-based entrepreneurs, NYC has some pretty stellar local funding options.

What is an unsecured business loan?

Photo:  Spectrum News
Photo: Spectrum News

An unsecured small business loan is a loan that requires no collateral but rather is based solely upon the creditworthiness of the small business borrower. Although in the past this type of financing was available to a very creditworthy business borrower, unsecured small business loans may be difficult for many small businesses to obtain. The most common form of unsecured business financing that small business owners would encounter today is a business line of credit or business credit card.

Banks generally prefer a secured v. unsecured business loan, as they would rather write loans based on the value of specific assets.

What is a secured business loan?

Banks generally prefer secured—rather than unsecured—business loans. Secured loans are loans that are backed with some sort of collateral like real estate, equipment, or other valuable business assets the bank can seize and sell if the loan is not repaid.

Banks (or other lenders that require collateral) commonly determine what they refer to as the loan-to-value ratio of your collateral based upon the nature of the asset. In other words, your banker may allow you to borrow against 75 percent of the value of appraised real estate or 60 percent to 80 percent of the value of what they call ready-to-go inventory. Because lenders might consider their loan-to-value ratios differently, you’ll need to ask any potential lender how they intend to set that value.

What is Considered a Small Business in New York?

Photo:  complianceassociatesnyc.com
Photo: complianceassociatesnyc.com

While the Small Business Administration has its own definition of what a small business is (one with 500 or fewer employees), New York state has its own definition.

Small businesses in the state are those with 100 or fewer employees. Why does this matter? Small business owners applying for loans or grants may need to meet certain criteria, including the size of their business.

Type of Small Business Loans in New York

Coronavirus Pandemic Loans

Though some of the programs designed to help small businesses get back on their feet, both in New York and the rest of the country, are now closed, here’s an overview of what was available.

At the federal level, both the Paycheck Protection Program (PPP) and the Economic Injury Disaster Loans provided financial relief to small businesses.

At the state level, the New York Forward Loan Fund (NYFLF) may still be open to New York state businesses looking for financial aid. Check the link to get the latest updates.

Term Loans

Business lenders like traditional banks, credit unions, and online lenders offer longer-term loans with low-interest rates to small businesses with great credit.

SBA Loans

The U.S. Small Business Administration is another resource for financing with long-term, low-interest loans. Learn more about programs like the SBA 7(a) and 504 loans at SBA.gov.

Lines of Credit

When you don’t need a lump sum of cash all at once, a business line of credit can be helpful because you can borrow from that line a little now and a little later. When you pay back what you’ve borrowed, it’s available again to borrow from.

Equipment Financing

If you’re specifically looking for financing to purchase equipment like computers, machinery, or company vehicles, there are equipment loans that can help. With these, interest rates may be lower because the equipment you’re buying acts as your collateral.

Credit Cards

Having one or more business credit cards can be valuable for making purchases like office supplies. Look for a card with a 0% APR introductory offer and a great rewards program.

Short-Term Loan

Even if you don’t have good credit, there are short-term loan options that will get you the capital you need. Note that these tend to have higher interest rates and shorter repayment terms.

Best Small Business Loans for NYC Businesses

Photo:  AllBusiness.com
Photo: AllBusiness.com

1. NYC Capital Access Loan Guaranty Program

New York City Economic Development Corporation's (NYCEDC) NYC Capital Access Loan Guaranty Program (Cap Access) provides up to a 40 percent guarantee on loans for qualified New York City micro and small businesses having trouble accessing loans. Loans created through this program can be used for working capital, tenant improvements, equipment purchases, and refinancing of existing loans.

For this program, micro-businesses are businesses that have 20 employees or less. Small businesses are defined as having between 21 and 100 employees.

Program Benefits:

Better access to competitively priced loans

Access to a network of business lenders

Referral to small business counseling and training programs

NYC Business Solutions has partnered with NYCEDC to provide free Capital Access advisory services to small businesses interested in applying for Capital Access loans. NYC Business Solutions can help business owners determine which Capital Access lender best fits their needs and business profile.

2. TD Bank

TD Bank, N.A., is an American national bank and subsidiary of the Canadian multinational Toronto-Dominion Bank. It operates primarily across the East Coast, in fifteen U.S. states and Washington, D.C. TD Bank is the seventh-largest U.S. bank by deposits and the 11th largest bank in the United States by total assets, resulting from many mergers and acquisitions. T.D. Bank, N.A. is headquartered in Cherry Hill, New Jersey.

Small, NYC-based businesses should also consider TD Bank as a go-to source for funding. Not only is TD Bank a Preferred SBA Lender, they were also #1 of the top NYC SBA lenders of 2018. Through their participation in both the SBA 7(a) and SBA CDC/504 loan programs, TD Bank funded 898 SBA loans and $67,261,200 total loan volume to New York small businesses.

If you’re looking for an SBA loan for a well-qualified NYC small business, then TD Bank could be one of your very best options. Just know that SBA loans from any SBA lender—much less the top SBA lenders in NYC—will be hard to qualify for. If you’re working with at least two years in business, a personal credit score of at least 680, and at least $180,000 in annual revenue, then TD Bank SBA loans could be an option for you.

3. WE Fund Credit

Run by the WE NYC initiative out of the NYC Department of Small Business Services, the WE Fund Credit program provides small business lines of credit to NYC-based female entrepreneurs.

To be eligible for a business line of credit from this NYC business funding program, you must identify as female, do business in NYC, have been in business for at least a year, and earn at least $50,000 in annual revenue.

Credit limits for this NYC small business funding option will be as much as $100,000. Be sure to note, though, that applications for this program will open up in the Spring of 2019, but you can fill out a form on their website to be notified when they begin accepting business loan applications.

4. The Brooklyn Fund

The New York Business Development Corporation administers a small business loan program called The Brooklyn Fund for Brooklyn-based small businesses. To be eligible for these small business loans, you’ll need to do business out of Brooklyn, be a for-profit business, and be owned by a permanent resident or citizen of the United States.

These small business loans for Brooklyn small businesses can range from $25,000 to $350,000 with term lengths from 5 to 10 years long, and rates from 6% to 8%. To apply, you’ll have to submit your application through the Brooklyn Chamber of Commerce’s Business Solutions Center at 9 Bond St., 5th Floor, Brooklyn, NY 11201. Application fees can cost anywhere from $150 to $1,300.

5. Excelsior Growth Fund

Another top option for NYC small businesses looking for affordable business funding is Excelsior Growth Fund. Excelsior Growth Fund is a non-profit CDFI that provides small business loans to small businesses in New York, New Jersey, and Pennsylvania. EGF offers several forms of funding that can offer as much as $500,000 in capital. Their signature product is their EGF Smartloan, though. This NYC small business loan offers up to $100,000 in funding that borrowers can apply for online and access within a week if they qualify.

EGF is also a certified SBA Microloan intermediary, so if you’re looking for $50,000 or less of small business funding for your NYC business, then an SBA Microloan from EGF could be your most affordable option.

6. Business Center for New Americans

Finally, one more top local source of small business loans for NYC-based businesses is the Business Center for New Americans. BCNA is another CDFI and certified SBA Microlender that provides microloans of $500 to $50,000 to NYC small businesses.

Applications for Small business loans from BCNA are open to all small businesses in Queens and Staten Island and open to immigrant-, refugee-, or woman-owned businesses in Manhattan, Brooklyn, and the Bronx. You’ll also need at least a guarantor with good credit for loans of more than $3,000.

Repayment terms for these loans will range from six months to three years, and interest rates are currently from 8.5% to 10%. Closing fees are 2% of the loans amount, and loan application fees will be $25 – $50.

One distinguishing perk that BCNA offers is that they consider startup applications. An established business will have to demonstrate three to six months of revenue (which, of course, will strengthen their application). But startups will be able to submit applications for these small business loans with a projected startup budget.

How to Apply for a Small Business Loan in New York

Photo:  Forbes
Photo: Forbes

Loan applications will also vary in complexity, from one lender to another. Online lenders tend to have short applications, requiring little more than a few details about your business and annual revenues.

SBA and bank loans may require more details, such as tax returns, financial statements, and a business plan.

If you don’t have a business plan, look to business resources like the New York Small Business Development Center, which can provide technical assistance and help you develop a business plan at no cost.

Read More: How To Get A Small Business Loan In America

Best Lenders for NYC Small Business Loans

1. Chase Bank

JPMorgan Chase Bank, N.A., doing business as Chase Bank or often as Chase, is an American national bank headquartered in Manhattan, New York City, that constitutes the consumer and commercial banking subsidiary of the U.S. multinational banking and financial services holding company, JPMorgan Chase. The bank was known as Chase Manhattan Bank until it merged with J.P. Morgan & Co. in 2000. Chase Manhattan Bank was formed by the merger of the Chase National Bank and the Manhattan Company in 1955. The bank merged with Bank One Corporation in 2004 and later acquired the deposits and most assets of Washington Mutual.

Chase offers more than 5,100 branches and 17,000 ATMs nationwide. JPMorgan Chase & Co. has 250,355 employees (as of 2016) and operates in more than 100 countries. JPMorgan Chase & Co. had their assets of $2.49 trillion in 2016.

2. Cross River

Cross River Bank is an American state-chartered commercial banking corporation, headquartered in Fort Lee, New Jersey. Cross River, which is an FDIC member and an equal housing lender, operates under a New Jersey charter. Cross River is notable among community banks for its embrace of the trend in the financial services sector towards API-based payment platform services.

Cross River describes itself as a “trusted financial services organization that merges the established expertise of a bank, with the innovation and product offering of a technology company.” Founded in 2008, the company’s home office is just outside the City in Fort Lee, New Jersey. They’ve earned rave reviews from their small-business clients for competitive rates and terms, especially for SBA-backed loans. Customers can borrow up to $5 million on a 7(a) SBA-backed loan and up to $18 million for 504 loans with repayment periods of up to 25 years.

3. Brooklyn Cooperative Federal Credit Union

Brooklyn Coop is one of the city’s top small-business lenders. It’s a credit union, not a bank — which means it’s a non-profit institution. It considers loan applications “from any business regardless of its history,” offering flexible repayment terms of up to 12 years. Its startup loans start at $500 and go up to $15,000, while established companies can borrow up to $50,000.

4. NYC Capital Access Loan Guaranty Program

The NYC Capital Access Loan Guaranty Program is a public-private partnership that helps micro and small businesses who have been unable to access conventional bank loans get up to $250,000 to be used for working capital, leasehold improvements, and equipment purchases.

5. Nonprofit Finance Fund

If you’re a nonprofit or social-enterprise startup looking for funding, the Nonprofit Finance Fund’s New York office is an option to investigate. NFF currently manages over $347 million in assets and has provided $875 million in financing over the past 40 years. It’s a US Community Development Financial Institution (CDFI), meaning its focus is on making affordable loans available to help a community’s least-advantaged citizens.

Are small business loans right for your business?

While small business loans are one of the most popular funding options available to entrepreneurs, like any form of borrowed money, they boast a number of pros and cons.

Advantages of small business loans

There are plenty of reasons that many entrepreneurs lean on small business loans to start or grow their operations, including:

• Convenience. Every town has a bank or financial institution, and there are also many online lenders that offer small business loans. That means it’s convenient and relatively easy to approach a lender for this type of funding.

• Businesses can access large amounts of capital. Depending on the type of small business loan and the intended purpose for the funds, entrepreneurs can borrow large sums of money to start or run their business. For example, the U.S. Small Business Administration (SBA) showed that the average amount business owners borrowed through its 7(a) loan program in 2016 was $417,316. That average amount ballooned to $600,000 for small business loans from national banks in 2016.

• Lower interest rates. Business owners with good credit scores can typically get a relatively low borrowing rate on small business loans. The interest rate will depend on the amount borrowed, the entrepreneur’s credit score, and a few other factors, but traditional lenders like banks or credit unions usually offer annual percentage rates (APRs) ranging from 4% to 13%, while online lenders can have APRs from 7% to over 100%. Compare that to average credit card interest rates, which were around 19.88% for borrowers with good credit in 2018.

• Different types of loans for different needs. Not all small business loans are created equal. There are a handful of different loans to meet a variety of needs, which is a boon for small businesses. For example, SBA 7(a) loans and SBA Express loans can be used for a wide variety of purposes, including growth capital and refinancing. For real estate or heavy equipment or machinery, entrepreneurs can lean on CDC/504 loans. The SBA also works with a variety of nonprofits to offer microloans for amounts ranging from $1,000 to $50,000.

Drawbacks of small business loans

Although small business loans have plenty of advantages that make them enticing for business owners, they also have a few downsides:

• Interest rates depend on your credit score. While banks often offer lower interest rates than other funding options (like credit cards), it’s not always easy to get those low repayment rates. Typically, the interest rate banks offer depend on your credit score—so if you have a below-average rating, you’re less likely to get that low interest rate. That means you pay more in the long run for the privilege of borrowing the bank’s money.

• Lenders often require collateral. To ensure their investment is secure, many financial institutions require business owners to offer some form of collateral in case you can’t make your payments. For many entrepreneurs, they have to use personal assets as collateral for business loans. That means if you put your home up as collateral on a small business loan, if your business fails and you can’t make payments, you’re in danger of losing your house.

• Banks prefer to lend to established businesses. If you’re a fresh-faced entrepreneur just starting out, it’s often more difficult for you to obtain a small business loan from a traditional lender like a bank. To ensure they’ll be repaid on time, financial institutions like to lend to businesses that can show them signs of success (i.e., sales statements or revenue projections). This is challenging for upstart companies that haven’t made any revenue yet.

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