The Best Business Loan & Financing Resources For Alabama Small Businesses
Alabama is a state with an unusually hazy business reputation. Depending on which criteria you use, Alabama ranks near the top or the bottom for states to do business in. The moral of the story? Take these reports with a grain of salt and do business in Alabama because you like doing business in Alabama.
The more important question is “what financial resources are available to small business owners in Alabama?” And it’s one we’re going to try to answer below.
We’ll take a look at some of the financial options available to you down in Dixie, as well as some specific lenders you may want to consider.
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The Best Online Business Lenders For Alabama Businesses
Alabama is one of the most rural states in the nation, which is great for people who don’t care for concrete canyons and noise. That can have some drawbacks when it comes to accessing capital, since many of the big traditional players like to target dense urban areas.
The good news is you need traditional lenders less than ever today. Online lenders specialize in lending to customers remotely, and the vast majority of them are willing and able to lend to businesses based in Alabama.
What are the advantages of working with an online lender? Generally speaking, online lenders are faster, have simpler application processes, and more flexible lending standards than traditional lenders. The tradeoff, of course, is they also tend to have higher rates and more concentrated repayment term lengths. That said, the best online lenders offer transparent terms and excellent customer service.
Since there are tons of online lenders to sift through, here are some of our recommendations to get you started:
Credit scores can be a catch-22 for businesses; in order to repair your credit, you have to get credit. Luckily, lenders like Fundbox make it a bit easier to sidestep that conundrum.
Fundbox doesn’t have any hard credit requirements, but they do want to see that your business does at least $50K/year in revenue. They’ll assess your borrower-worthiness based on a number of other factors which you can read about in our review.
Fundbox offers lines of credit and invoice factoring.
If you’ve ever used a third party platform to locate a product, you have a basic idea of how Fundera works. Using the platform grants you access to Fundera’s entire network of lenders with a single application. They’re a great option if you’re unfamiliar with the online lending scene and aren’t sure where to start.
PayPal’s LoanBuilder service has fairly low credit requirements, reasonable (for an online lender) rates and can get you your money quickly. They deal purely in short-term loans, however, so you’ll want to be prepared to pay back the loan quickly.
Mature small businesses that need a bigger source of funding may want to consider P2BInvestor, especially if they’re struggling with poor credit.
P2BInvestor allows you to open a $250K – $10 million line of credit that’s secured with your assets. The amount you’re extended is based on the value of those assets, so this won’t be the best option for every business.
One of the oldest and most mature online lenders, OnDeck offers short-term loans and lines-credit-of credit to businesses. They don’t necessarily have the lowest rates in the business, but their product line-up is versatile and transparent, so you should have few surprises.
OnDeck is one of the bigger names in online lending, offering a mix of short-term loans and lines-of-credit to businesses that need money quickly. They’re willing to work with businesses with good credit, while offering transparent and relatively reasonable terms.
Another option for businesses with poor credit is Credibly. They offer both short and medium-term loans up to $400,000. They aren’t the cheapest option by a long shot, but they’re transparent and versatile enough to fit the needs of most small businesses.
Alabama Banks & Credit Unions
As convenient as online lenders can be, there are still a lot of advantages to traditional bank and credit union lenders. Stricter lending standards and less aggressive profit strategies (or non-profit in the case of credit unions) usually mean better rates and terms than you’d get with the digital crowd.
Alabama is underserved by many of the big national banks, many of whom do not have a presence in the state (Wells Fargo being a notable exception). While that absence does put the deepest pockets out of reach of many Alabama small businesses, their absence does leave room for local and regional banks to fill the void. In fact, Alabama’s biggest lenders are based in the state.
Heavy hitters in the state include:
- Regions Bank: The largest lender headquartered in Alabama, with branches and ATMs throughout the Southeast.
- BBVA Compass: Also headquartered in Birmingham, BBVA has branches in Alabama, Arizona, California, Colorado, Florida, New Mexico, and Texas.
- ServisFirstBank: A relatively new player (also based in Birmingham) with substantial assets. They have a presence throughout Alabama, as well as branches in Florida, Tennessee, and South Carolina.
As non-profit entities, credit unions can provide lower rates than similar for-profit businesses like banks. They are, however, often more limited in the services they can provide and rarely have a branch presence comparable to even mid-sized banks.
Not all credit unions offer business loans, but even if they don’t they may offer personal loans that can be used for business expenses.
Some of the more accessible credit unions in Alabama include:
- Redstone Federal Credit Union
- APCO Employees Credit Union
- Americas First Federal Credit Union
- Max Credit Union
- Army Aviation CFederalFedral Credit Union
Small Business Grants In Alabama
What’s better than a loan? Free money! What’s a lot harder to get than a loan? Also free money!
Grants are highly competitive sums of money awarded to businesses that fit the particular grant’s criteria. Unlike loans, you don’t have to pay grants back. The application and judging process for grants is almost always far more time consuming, however, so expect to put a lot of time into pursuing them if you choose to.
For some general advice on where to seek them, check out our grant feature.
Resources For Startups In Alabama
State and local governments are usually invested in helping businesses take root in their communities. Alabama is no different. Also note that the federal Small Business Administration (SBA) operates in every state (and even territories like Puerto Rico) and offers loan guarantees and other services.
Some Alabama-specific resources include:
- Alabama Department of Commerce: State organization specializing in rural development.
- Alabama Small Business Development Center Network: A handy hub with links to programs and organizations throughout the state, including business incubators.
- Alabama Microenterprise Network: Non-profit org providing information and support to microenterprises.
- Alabama Department Of Economic And Community Affairs (ADECA): State department administering a number of business-related programs.
What To Consider When Choosing A Lender
Discussions of lenders often focus on how borrowers can make themselves more appealing to the lender, but remember that you’re the one ultimately “buying” a service. If it doesn’t fit your needs, it’s not worth the headache.
Here are some factors to consider that will help you weed out lenders that don’t match your business goals:
- Your Industry: Some lenders specialize in lending to a specific industry. Others can’t or won’t lend to certain industries. If they can’t write you a loan, cross them off your list.
- Borrowing Amount: If you need $5,000, you’ll be looking at different lenders than if you need $5 million. Choose the right tool for the job.
- Rates & Fees: How much is it going to cost you? Are the lender’s rates in line with the industry standard? Do they tell you what additional fees they charge, or do they hide them?
- Time To Funding: Do you need the money right away or next quarter? Choose a lender that can work with your timetable.
- Term Lengths: You’ll want to know how quickly you have to pay the money you’re borrowing back. Make sure you can afford the loan over the long-term.
- The Type Of Expense Being Financed: Some financial products are limited in what they can be used for. Do you need a lump sum of cash? Or do you need a line of credit that you can draw upon periodically?
- Collateral: Secured loans and lines of credit require some form of collateral, usually in the form of an asset, real estate, or cash deposit. If you don’t have collateral to put it, you’ll want to look at unsecured loans.
Whether you’re looking to start a business in the heart of Birmingham or off the beaten path in the Northwest, Alabamians can tap a variety of financial resources to get their businesses running or expanded.
Just starting out? Check out our resources for startups.