Top Small Business Loan Options in Virginia

wning a business can be exciting, but it requires financial resources to get off the ground and keep things moving. It can be tough to accumulate the kind of cash it takes to start a business or weather any financial storm that comes your way. In Virginia, ambitious entrepreneurs have several options for obtaining small business loans and grants.

This article will delve into the small business loan options and grant opportunities available in Virginia and explore alternative financing methods. Additionally, you'll walk away with the crucial steps you need to take before applying for small business loans in Virginia.

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Small business loan opportunities in Virginia

Virginia offers several avenues for small business owners to access loans. These loans are typically reserved for businesses with fewer than 100 employees.

Traditional bank loans

Local and national banks operating in Virginia provide loans specifically designed for small businesses. These loans typically have fixed or variable interest rates, with terms and conditions varying based on the lender. Unfortunately, traditional bank loans may require collateral and a solid credit history.

Some great options for traditional bank small business loans in Virginia that are offering the lowest interest rates:

• The First Bank and Trust Company: Average rate—4.63%
• Live Oak Bank: Average rate—5.40%
• Truist Bank: Average rate—5.00%
• Dogwood State Bank: Average rate—5.62%

Small Business Administration loans

The Small Business Administration (SBA) offers loan programs that support businesses across the United States. Virginia entrepreneurs can apply for SBA 7(a), SBA 504, and SBA Express loans. SBA loans are a great option as they often offer longer repayment terms than traditional bank loans.

Credit unions

Unlike traditional banks, credit unions prioritize member needs over profits, offering lower interest rates, more flexible terms, and a focus on community support, making them an attractive option when you're searching for a small business loan local to Virginia.

The Virginia Credit Union, for example, offers commercial mortgages, term loans, and lines of credit to members.  

Community development financial institutions

Community development financial institutions (CDFI) are specialized financial institutions that serve communities and provide loans to small businesses. In Virginia, Virginia Community Capital is a CDFI that offers flexible loans for:

• Business acquisition
• Equipment financing
• Owner-occupied real estate
• Debt refinancing

In addition to SBA loans, CDFI offer:

• USDA Loans
• Solar Loans
• Conventional term loans and lines of credit

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Small business grant opportunities in Virginia

Securing grants is an excellent way to fund your small business without going into debt, but it can be competitive and often requires that you meet specific criteria. Let's look at some of the best grant options in Virginia.

Virginia Small Business Financing Authority grants

Working with the Virginia Economic Development Partnership, the Virginia Small Business Financing Authority is a 501(c)(3) nonprofit that provides small businesses, nonprofits, and economic development authorities with the loans needed for economic growth and expansion throughout the Commonwealth of Virginia. Its definition of a small business is one with less than $10 million in revenue yearly for the last three years or fewer than 250 employees in Virginia. It offers grants that range from $500 to $2,000 for each new full-time position you create in Virginia.

The Industrial Revitalization Fund

The Industrial Revitalization Fund aims to revitalize and redevelop industrial properties that have fallen into disrepair and create a physical and economic blight on the local community. Administered by the Virginia Department of Housing and Community Development, the IRF provides grants and loans to businesses to renovate, rehabilitate, or redevelop these sites.

In 2022, it awarded millions of dollars to businesses all around Virginia that sought to revitalize vacant industrial buildings.

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Additional financing options to consider

Grants and loans aren't the only options. There are a lot of other funding sources to consider.

Merchant cash advance

A merchant cash advance is a financing option in which a lender provides a lump sum in exchange for a portion of the business's future credit or debit card sales.

There are a number of pros and cons, so be sure to learn more about merchant cash advances before you make your choice.

Venture capital

Venture capital involves obtaining funding from investors interested in high-growth potential businesses. Venture capital funding can be an attractive option for companies with innovative products or services that have the potential to scale rapidly.

Crowdfunding

Crowdfunding platforms such as Kickstarter and Indiegogo enable entrepreneurs to raise funds by appealing to a large number of individuals who contribute small amounts. This method can be particularly effective for businesses with innovative products or unique value propositions that resonate with a broader audience. Crowdfunding allows businesses to gain exposure, validate their ideas, and access funds directly from potential customers and supporters.

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Key steps to take before applying for a loan in Virginia

It's said that chance favors a well-prepared mind, so if you want to ensure a successful small business loan in Virginia, make sure you've completed these steps before you move forward.

Develop a comprehensive business plan

Whether it's a grant or loan, whoever is giving you money needs to know that you'll use it effectively. Outline your business concept, target market, competitive analysis, marketing strategies, and financial projections. A well-structured business plan demonstrates your commitment and provides lenders with a clear understanding of your business's potential for success. For guidance on developing your business plan, reach out to the Virginia Small Business Development Center.

Evaluate your creditworthiness

Your credit score tells lenders how reliable you are when paying back money that you owe. Check your personal and business credit scores, and address any errors or discrepancies. You can obtain your personal credit report from major credit bureaus such as Equifax, Experian, and TransUnion.

Research and compare lenders

Explore different lenders and loan options to identify the ones that best align with your business's needs. Consider interest rates, repayment terms, fees, and lender reputation. Reach out to multiple lenders to compare offers and negotiate terms if possible.

Gather necessary documentation

Being prepared saves time and effort during the loan process and demonstrates your organization and professionalism to lenders. Prepare all required documents, such as financial statements, tax returns, and legal documents including licenses and permits. It's also wise to consult each lender to see if they require any specific documentation or organization method.

Prepare a compelling loan proposal

A persuasive loan proposal highlighting your business's strengths, market potential, unique value proposition, and how the loan funds will be used will sell lenders on your business and convince them that you'll be able to repay the loan on time. Create and present a repayment plan so lenders know you already have a step-by-step guide to repay your small business loan.

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Takeaways

If you're searching for a small business loan in Virginia, you have more options than you think. Researching grants to see if you fit the criteria is a great place to start since you don't have to pay back the money. Alternatively, financing options like merchant cash advances can help you raise capital quickly to keep your business afloat or supplement other funding sources.

Novo offers free online business banking solutions that can help keep your small business finances organized and set your Virginia small business up for success.

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Novo Platform Inc. strives to provide accurate information but cannot guarantee that this content is correct, complete, or up-to-date. This page is for informational purposes only and is not financial or legal advice nor an endorsement of any third-party products or services. All products and services are presented without warranty. Novo Platform Inc. does not provide any financial or legal advice, and you should consult your own financial, legal, or tax advisors.

Novo is a fintech, not a bank. Banking services provided by Middlesex Federal Savings, F.A.: Member FDIC.