Arizona Small Business Loan Options for Startup & Established Businesses

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arizona small business loan
(Last Updated On: January 10, 2018)

If you’re looking for an Arizona small business loan, you’re on the right track. Experts consider Arizona one of the top 10 states to start and grow a business. Low taxes and the best resources make them an ideal location for business. Even with all the advantages and low startup, you need funding to grow.

arizona small business loan

Arizona Commerce Authority ranked the state 5th best location to access business capital. There are several options to fund a small business in Arizona. That doesn’t mean all financing will be the right fit for your business. That’s why I’m giving you a breakdown of what you’ll find in each Arizona small business loan.

Look for These Arizona Small Business Loan Options

Unsecured Business Lines of Credit

This type of financing is working capital you can access without collateral. You’re borrowing the money, but lenders don’t consider an unsecured line of credit a traditional loan. Once you’re approved, you can use any amount up to your credit limit. Like a business credit card, repayment begins soon after you’ve used the funds. The available credit also returns to the original amount once you make payments.

There aren’t stipulations on what you can use the funds for. Most businesses use this type of financing for short term projects. That way they can see a quick return on the money they’ve spent without piling up debt. Use an unsecured line of credit to fulfill purchase orders or pay for marketing. Unsecured business lines of credit also give businesses a chance to build a business credit history. That way businesses can grow with less strenuous approval requirements (specifically, when applying for business trade credit).

How to Get an Unsecured Business Line of Credit in Arizona

Businesses of all levels are most likely to qualify for this product. It’s not an official Arizona small business loan. So there’s no need to prove yourself from a business standpoint. There are a few other qualifications you need to meet on the personal side.

The main thing you need before applying is good personal credit history. Specifically, with a personal credit card (making payments on time, keeping the balance low, etc.). If you’ve maintained a credit card for at least 5 years, you can get approved for an unsecured business credit line.

Credit Limit for Arizona Small Business Owners

Most unsecured business lines of credit don’t start off in the millions like some loans. The criteria and use of the loans are different. You can expect more funds to work with than what a personal credit card would allow. Most lines of credit start off around $20,000 for qualified businesses. With time and good payment history, you will be able to increase your limit.

Equipment Financing

If you don’t have the money to buy large business tools upfront, equipment financing can help. This Arizona small business loan helps you get vehicles, equipment, or machinery. Even if you have the money to buy equipment, there are reasons not to. Equipment financing helps maintain cash flow, keeping the latest tools at your fingertips. Since you’ll be making monthly payments, you won’t be depleting your bank account for a lump sum. Some plans also give you the option to upgrade or trade once you’ve completed your payments.

Benefits of Equipment Financing

  • Tax write-offs
  • Equipment is collateral
  • Keep working capital
  • Convenient monthly payments
  • Updated equipment
  • Types of Equipment Financing

The most common types of equipment financing are equipment loans and equipment leases. Equipment loans front the money to pay for the equipment. The lender makes payment arrangements with a set amount of terms and any fees plus interest. Once you pay off the arizona small business loan, the equipment belongs to the business.

Equipment leasing is almost like an equipment loan. You still have a set payment term with possible fees and interest. The main different is what happens at the end of the term. The equipment belongs to the leasing company, so you would return it to them. You may also have the option to buy the equipment or get an updated version of it.

How to Qualify for Equipment Financing

From easiest to hardest, equipment financing falls behind unsecured business lines of credit. It’s not hard to get equipment financing if you’ve been fairly responsible. Unlike other financing options, you only need a 650 credit score. You may also need a year of business under your belt and at least $50,000 in revenue. Some lessors are more flexible based on having the equipment as collateral.

After working with a financing expert, you’ll know where your business stands. From there, you can start the process of getting a quote for equipment. Send the vendor’s quote to lenders or lessors to start the application process. If you get approved for the Arizona small business loan, you will sign a promissory note (equipment financing agreement).

Average Funding Amounts for Equipment Rental in Arizona

The cost of different types of equipment varies. Office equipment will likely cost much less than farming or factory machinery. Cost and ability to pay will determine how much your Arizona business can get for equipment. You may qualify for a few thousand dollars or a few million. The amount depends on your credit history, revenue, and business activity.

SBA Loans

For those who won’t qualify for another type Arizona small business loan, an SBA loan may still be an option. Options from the U.S. Small Business Administration help small business owners propel. While they don’t actually lend the money, they create loan programs and criteria. Collaborations with banks, credit unions and small lending institutions make it possible. These loans help businesses get supplies, equipment, and working capital.

Here’s How SBA Loans Work

Each loan has specific instruction for how the business can use the funds. Once you speak with a counselor or SBA lending expert, you’ll have an idea of the loan you should apply for. The SBA guarantees loan repayment to the financial institution up to 75-85% percentage. For loans under $150,000, the government guarantee is 75%. It’s 85% for loans above $150,000. If the small business defaults on the loan, the bank still gets most of their money. This makes them willing to extend loans to small businesses they normally wouldn’t touch.

Types of SBA Loans

Currently, the Small Business Administration has six different loans. Take a look at our summary to get an idea of which type of loan works best for your business.

7(a) Loans

This loan is the one businesses most commonly request. It’s probably because 7(a) loans offer the most options for what business level can apply and how you can use the funds. With the arizona small business loan, owners can buy facilities, equipment, or supplies. You can also have working capital among other things.

Loan amounts cap at $5 million dollars, but amounts over $25,000 need collateral. All applicants must have a solid credit history. Startups must also have at least a 700 credit score and work experience in their chosen industry. Loan terms range between 10 and 25 years.

Microloans

With this loan, new small businesses prove themselves before reaching out to lenders. It helps entrepreneurs get funding to start or expand. Like the 7(a) loan, you have flexibility with how to spend the funds. The only stipulations are that you can’t buy real estate or payoff debt. Credit requirements aren’t as rigid as with the 7(a) loan. The loan amounts are also much smaller. The most you can apply for is $50,000 and most are much smaller. Terms for the loan cap at six years.

CDC/504 Loans

This long term funding option is for big projects to acquire real estate or large equipment. It requires strong personal credit and some investment from the applicant. The borrowing business will need to contribute 10 percent of the total project cost. The SBA will throw in 40 percent. From there, the financial institution covers the remaining 50 percent. CDC/504 loans are up to $5.5 million with terms of 10 or 20 years.

CAPLines (Lines of Credit)

Sometimes you will run into a large order that you need capital to fulfill. You may need supplies, extra labor, or working capital to meet the demands of the project. This program will help businesses complete their contract or purchase order. With this line of credit, you need good credit history and collateral to qualify. The program does accept accounts receivables, purchase orders, or inventory as collateral.

Export Loans

Like with most of the loan options I mentioned, you need good personal credit and collateral. If you have that, your international trade business can get the financial boost it needs. The loan helps those who operate business exporting products out of the country.

Disaster Loans

Disaster loans help businesses who have experienced a catastrophe. Businesses with damages from natural disasters or economic turmoil can restore their resources. Arizona businesses experienced natural disaster like droughts, wildfires, and flooding that caused extensive long term damage. These incidents caused damage to businesses of all types. It left owners in need of an arizona small business loan.

Businesses of all sizes can apply for disaster loans. Funding helps you restore or purchase a new building, equipment, or inventory. You can also use the funds as working capital. Interest rates are low and loan amounts go up to $2 million.

Eligible Loan Amounts for Business Owners in Arizona

According to the SBA, their loans range from $500 to $5.5 million. The amount you can get depends on the program you apply for. Your business activity and personal credit history also matter. Being backed by the SBA does give you some flexibility. Still, you must meet certain qualifications to get an SBA loan of any amount.

How to Qualify for an SBA Arizona Small Business Loan

You may not need perfect credit to get funding for your business. You just need the right business and a good track record. To start the process, you’ll need to apply with an SBA approved lender. Before that, make sure you meet their standards to have a better chance at getting the loan. The Small Business Administration has criteria you must meet to be a part of their loan program.

For starters, you must fit the SBA’s description of a small business. They consider companies with 500 or less employees to be a small business. Your business must have its physical location and operations in the United States. Your state must also recognize you as an official business. In other words, you must register and have a business license as required for your industry.

Do your owner due diligence while working toward an Arizona small business loan. Before requesting funds from the SBA, you need to show that you’ve put your own sweat and money into the business. The business must also be in a position that you won’t qualify for funds from other lending sources.

Other Requirements May Include:

  • Personal financial information
  • Resume
  • Business License or Articles of Formation
  • Business Plan
  • Business bank statements
  • Income tax returns
  • Financial statements
  • Business lease
  • Loan application history

Revenue Based Loans

Revenue based loans are another financing option outside of a traditional bank. It fills in the gap for those who don’t yet have the assets lending institutions require for financing. If you’re a growing business with consistent revenue, this may be a good fit. These types of loans advance money based on the business sales history.

When you apply for revenue based loans, the merchant will review your sales. It helps them determine what amount or percentage of sales you qualify for. The business repays the loan with a percentage of their future revenue for a set term. You keep the business while getting the Arizona small business loan you need to grow.

How Arizona Businesses Can Get Revenue Based Loans

Revenue based loans are the most difficult of the alternative financing options. This is because you need enough revenue to make it work. To get this type of funding, you need between $5,000 and $15,000 of revenue monthly depending on the lender. You also have to show proof of previous credit card sales and deposit history for 6-12 months. Fair personal credit history is necessary. You also can’t have outstanding liens or bankruptcies on your report. If you meet all the requirements, you can work with a lending expert to apply with a reputable company.

Average Funding Amount

Like most of the alternative loans, the funding amount depends on you. A general range for a revenue based loan is between $50,000 and $1 million. What you’ve generated in sales thus far will determine your loan amount. Your credit background also helps lenders decide what you qualify for.

Need Help Getting an Arizona Small Business Loan? Apply Online

As you can see, your loan choice depends on several factors. Many of them are unique to your industry and business needs. Before completing any lending applications, it’s best to work with a financing expert. The best experts have years of experience, know what banks and government programs to look for, and can provide you with proof of results. An evaluation done by the right expert will help you get the right funding for your Arizona small business.

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