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Business Loans in Washington

Financing for Small Businesses in Washington State

Pre-Qualify for a Business Loan

When seeking business loans Washington state has many options for small business owners who need funding. The types and availability of financing depends in part upon the specific loan request being made. Financing options have traditionally been fairly broad and can include conventional as well as SBA loans. There are various loan purposes to consider as a borrower depending on whether the business owner is looking to purchase an existing business, obtain start-up financing for a new store, seek leasehold improvements, remodel, pursue construction of commercial property, or request financing for machinery, equipment and inventory.

Who are the lenders in Washington State?

There are approximately 58 Commercial Banks and Savings institutions in Washington which includes 1,200 bank branches throughout the state. Most small business owners often think about going to the bank where they have their personal account first before searching for other options. Credit Unions can also be a viable option for a small business loans; Washington has approximately 64 credit unions across the state. Credit Unions are able to lend to small businesses as long as the total loans to small businesses do not exceed 12.25% of the Credit Unions total assets. There are many alternative institutions that lend to small businesses in Washington including Economic and Community Development Centers as well as minority focused organizations. Further there are opportunities to work with Non-Bank lenders such as Small Business Administration (SBA) loan providers, Merchant Cash Advance, and Factoring companies that are not based in Washington, but do lend in the state.

Which Loan Products are Offered in Washington State?

There are several loan products that have been used to finance small businesses in WA, which can be structured as fixed, variable, or fixed to floating rate loans. Rates can vary dramatically depending on the loan purposes and the overall credit quality of the business and owners. The term and amortization is often structured anywhere between five and twenty-five years, depending on the assets being financed with the loan. Financing for hard assets such as machinery, equipment and real estate generally receive terms between fifteen and twenty-five years, while a loan for working capital and inventory could have a term of five to ten years. There are several loan products that borrowers should consider for their small businesses, including:

Use the Fundability App see how fundable you are in the eyes of Washington State business lenders

Asset Based Lines of Credit

Asset based lines of credit for an array of business uses. Asset based financing can be either revolving or term loans secured by assets such as accounts receivable, real estate, equipment or inventory. For more on Asset-based loans click here.

Conventional Loans

Conventional loans are typically made by traditional banks and some non-bank lenders. These loans are not guaranteed by any third party and the bank or lenders assume the full risk of the loan. Therefore, credit standards are usually higher for conventional loans. Pricing and terms can be more flexible for conventional loans as lenders can price lower for stronger loan requests.

SBA Loan

The Small Business Administration's (SBA) 504 and 7(a) loan programs are both popular alternatives to traditional financing options. A percentage, typically 75% of the full loan, is backed by the SBA so banks and lenders assume less balance sheet risk on the loan. However, all lenders utilizing SBA loan programs have to adhere to stringent loan eligibility requirements and SBA Standard Operating Procedures for loan underwriting including the pricing and terms for the loan. For the SBA 7a product, loan pricing can be priced using the Prime lending index plus a maximum spread of 2.75% - which is maximum allowable rate. Lenders may use variable rate pricing so as the Prime rate goes up or down the interest rate on the loan will move up or down as well. Terms are structured based on the assets being financed.

Unsecured Business Line of Credit

Unsecured credit refers to loans or lines of credit where there is no collateral to back the loan. Although this type of lending is possible for small businesses it is considered risky for lenders. The borrower's personal financial strength as well as the business cash flow needs to be strong in order to qualify for an unsecured line or loan.

Merchant Cash Advance

The merchant cash advance product is financing based on credit card receivables where the merchant cash provider will advance monies based on historical performance or credit card sales. This financing mainly works for brick and mortar retail, online retail or restaurant businesses where there is a large volume of credit card sales. Merchant cash is considered short-term financing and can a quick funding option for businesses.

Seller Carry Financing

For buyers of an existing business, it may be possible to negotiate financing with the seller. In lieu of receiving the full purchase amount, the seller may be willing to finance all or part of the purchase price. In this scenario the buyer and seller would negotiate the interest rate and terms of the financing. Typically sellers want to get paid out on the note within three to five years of the sale. One benefit of seller carry financing is that the seller will be supportive of the transition and should offer training to ensure that the buyer is successful taking the business operations over.

Credit Parameters for Washington State Business Loans

Credit parameters can vary across financial institutions depending on their appetite for a particular loan request. Many lending institutions look at Loan To Value (LTV) which is a measure of available collateral to back the loan. Lenders may establish the loan amount as low as 55% to 90% or more of the available collateral. Debt Service Coverage Ratio (DSCR) is a measure of the available cash-flow from the business to cover loan payments. Lenders typically like to see a minimum ratio of 1.25X or 1.35X available cash to the annual requested loan payments. The higher the ratio the better, as lenders like to have a larger cash cushion should a business see a dip in sales. The personal financial strength of the borrowers or business owners will also be analyzed by the lender. Lenders want to make sure that borrowers have enough liquid cash to both inject into the deal as well as for any problems that might arise in the future. The personal credit of a borrower and how they have managed debt will be looked at by the lender through a Credit Report.

The Economic Impact of Small Businesses in Washington State

To say small business is important to Washington State would be a gross understatement. In 2010 there were over 217,000 small businesses which represented 96% of all registered businesses in Washington State. These businesses employed 41% of all private sector employees which represents over 1.1 million private sector workers. From an economic impact standpoint firms with less than 20 employees pay over $18 billion in payroll to their employees, which represented 16% of the total state payroll. And, Washington state small businesses pay almost $800 million in Business and Occupation (B&O) tax to the state.

Apply for a Small Business Loan in Washington State

Securing financing for a small business loan in Washington relies largely upon the scale and purpose of the loan, but all such loans require comprehensive information on the business and the borrower. This includes financial and tax records, a detailed business plan and loan plan, projections of expected earnings, personal financial and tax records as well as resumes for all purchasing parties, and a listing of all assets and relevant documents detailing any proposed transactions.

You can apply for a small business loan with one of the 5,000 lenders on BoeFly.com, the leading online marketplace for business loans. A single loan request through BoeFly is the most efficient way to seek a small business loan approval in Washington. BoeFly simplifies the business loan process and helps small business owners by creating lender competition for their business, presenting an array of funding options, pricing and terms.