Small Business Loans in Colorado
RESOURCES, FINANCE
If you’re a small business owner in Colorado, you are looking for ways to finance your business. Learn why loans can be essential and how to find and apply for the right loan.
What Are Small Business Loans?
A small business loan is money that a business borrows from a bank, credit union, or online lender. The business uses this money to help pay for things like equipment, inventory, or daily expenses.
The loan has to be paid back over time, usually with extra money called interest.
Small business loans can be used for things like:
- Starting or growing the business
- Buying tools or supplies
- Paying employees
- Managing bills
The rules for getting a loan depend on the lender, and the business must show it can repay the money.
Example of a Small Business Loan:
Imagine John owns a bakery. He wants to buy a new oven to bake more goods. This will help him serve more customers. The oven costs $10,000, but he doesn’t have enough savings to pay for it upfront.
John applies for a small business loan from his local bank. The bank approves his loan and gives him the $10,000. He uses the money to buy the oven.
Over the next three years, John pays back the loan in monthly amounts, including a little extra for interest. With the new oven, his bakery can handle more orders, and his business grows!
Why a Small Business Needs a Loan
A small business might need a loan to cover costs that help the business grow, improve, or keep running smoothly.
Here are some common reasons why loans may be needed:
Starting the Business: New businesses often need money to buy equipment, rent space, or get their first batch of supplies.
Expanding: A business might need money to open a new location, hire more staff, or add new products and services.
Buying Equipment: Businesses often need expensive tools or machines to operate, like ovens for a bakery or computers for an office.
Managing Cash Flow: If a business has slow months or customers take time to pay, a loan can help cover bills, rent, or employee paychecks.
Marketing and Growth: To attract more customers, businesses may need money for advertising, redesigning a website, or launching new products.
A loan helps businesses invest in their future when they don’t have enough money saved to cover these costs upfront.
Average small business loan amount:
- SBA Loans: Around $107,000 (based on SBA’s microloan program and larger loans).
- Traditional Bank Loans: Typically average between $100,000 and $250,000.
- Online Loans: Usually smaller, averaging $50,000 to $80,000, as these are often used for quick funding.
- Microloans: Average around $13,000.
These averages can depend on the business’s size, creditworthiness, and what the loan will be used for. Larger loans are more common for established businesses with proven financial records.
How to Find a Loan in Colorado
Here’s how to find a loan based on whether your business is brand new or already established:
For a Brand New Business
New businesses often lack financial history, so the focus is on your personal credit and business plan.
- Check Your Credit Score
- Lenders will review your personal credit since the business doesn’t have a track record.
- A good credit score (680+) improves your chances.
- Create a Strong Business Plan
- Include details about your business idea, target market, expenses, and revenue projections.
- Highlight how the loan will be used and how you’ll repay it.
- Look for Starter-Friendly Loans
- Microloans: Organizations like Colorado Enterprise Fund or Accion provide small loans ($5,000–$50,000).
- SBA Microloans: Perfect for startups needing up to $50,000.
- Online Lenders: Platforms like Fundbox or BlueVine are more flexible for startups.
- Seek Help from Local Resources
- Visit Colorado SBDCs for free advice on loan applications.
- Use nonprofit lenders like Colorado Lending Source, which support new entrepreneurs.
- Apply with Complete Documentation
- Bring your personal financial records, business plan, and proof of identity.
- Some lenders may ask for collateral or a co-signer.
For an Established Business
Established businesses have financial records, making it easier to access traditional loans.
- Review Your Business Financials
- Prepare balance sheets, income statements, and tax returns from the last 2–3 years.
- Ensure your credit score and business revenue meet lender requirements.
- Decide the Loan Purpose
- Expansion? Equipment purchase? Managing cash flow? Clearly outline your needs.
- Explore Loan Types
- SBA 7(a) Loans: Ideal for larger amounts (up to $5 million).
- Traditional Bank Loans: Great for businesses with good credit and steady income.
- Lines of Credit: Flexible for ongoing expenses.
- Leverage Local Relationships
- Contact your local bank or credit union where you already have accounts.
- Build on your existing business credit and reputation.
- Apply for Larger, Longer-Term Loans
- Established businesses may qualify for higher amounts with better terms.
- Submit financial documents, business tax returns, and proof of business stability.
Key Differences
| Typical Offerings | New Business | Established Business |
|---|---|---|
| Credit Focus | Personal credit & business plan | Business credit & financial history |
| Loan Options | Microloans, startup-friendly | SBA, traditional, or larger loans |
| Documentation | Business plan, personal finances | Financial records, tax returns |
How to Apply for a Small Business Loan
Here’s what to expect and the documents you’ll need when applying for a loan:
Step 1: Determine What Loan You Need
- Decide how much money you need and what you’ll use it for (e.g., buying equipment, covering payroll, expanding operations).
- Ensure you understand how the loan will help your business grow or solve specific challenges. You should not be applying for a loan to just “get money” – you should have a reason.
Step 2: Check Your Eligibility
- Credit Score: Most lenders require a personal or business credit score of at least 600, but higher scores improve your chances.
- Business Revenue: Some lenders require proof of steady income (e.g., $50,000–$100,000 annual revenue for online lenders).
- Business Age: Many traditional lenders prefer businesses that are at least two years old, though startups can still apply for microloans or SBA loans.
Step 3: Choose a Loan Type
- SBA Loans: Low interest, long repayment terms, best for established businesses.
- Bank Loans: Large amounts with low rates, but strict approval requirements.
- Online Loans: Fast approval but often higher interest rates.
- Microloans: Small amounts ($5,000–$50,000), ideal for startups.
- Lines of Credit: Flexible funding for ongoing expenses.
Step 4: Gather Required Document
You’ll need to provide documents that show you can repay the loan.
Common requirements include:
- Personal Information
- Government-issued ID (driver’s license, passport).
- Social Security Number or Employer Identification Number (EIN).
- Business Information
- Business license or registration.
- Proof of ownership or partnership agreements.
- Financial Documents
- Personal and business tax returns (1–3 years).
- Bank statements (3–6 months).
- Financial statements (profit and loss, balance sheet).
- Business Plan (for new businesses or SBA loans)
- Include goals, market analysis, budget, and repayment strategy.
- Collateral Information (if required)
- Property deeds, equipment lists, or other assets offered as collateral.
Step 5: Compare Lender
- Research banks, credit unions, online lenders, or nonprofit organizations to find the best rates and terms. It is not a good idea to go with the first loan offered.
- Consider application fees, repayment flexibility, and approval time. Ensure you understand these aspects of any loan.
Step 6: Submit Your Application
- Complete the lender’s application form, either online or in person.
- Double-check all information and attach required documents.
Step 7: Wait for Approval
- Expect a Timeline:
- Online loans: 24–72 hours.
- Banks or SBA loans: 1–2 weeks or longer.
- Lenders may ask for additional information or schedule an interview to discuss your application.
Step 8: Review and Accept the Offer
- Review the loan terms, including:
- Interest rate
- Repayment schedule
- Fees (e.g., origination or prepayment penalties)
- If everything looks good, sign the agreement.
Step 9: Receive Funds
- Funds are typically deposited into your business bank account.
- Online lenders: Within 1–3 business days.
- Traditional lenders: May take up to a week or more.
Step 10: Use Funds Wisely
- Stick to the plan you outlined in your loan application.
- Make regular payments to avoid penalties and build your business credit.
Loans in Colorado
The Top 10 small business loans in Colorado:
- Colorado Enterprise Fund Loans
Offers small business loans up to $1 million for startups and expansions. Focuses on under-served businesses.
Apply here - Colorado Lending Source (SBA Loans)
Provides SBA 7(a) and 504 loans for small business development with amounts up to $5 million.
Apply here - Energize Colorado Gap Fund
Grants and low-interest loans for small businesses and nonprofits impacted by COVID-19, especially under-served groups.
Apply here - Accion Opportunity Fund
Microloans and small business loans for under-served entrepreneurs, including those in Colorado.
Apply here - First Southwest Community Fund
Specializes in funding rural and under-served Colorado businesses. Offers flexible loan options.
Apply here - Colorado Office of Economic Development and International Trade (OEDIT) Loan Program
Supports small businesses with loans and resources through state-backed funding.
Apply here - Community Advantage Program by Colorado Lending Source
SBA-backed loans for community-based businesses, focusing on underprivileged areas.
Apply here - Denver Small Business Emergency Relief Program
Provides microloans and grants to Denver-based small businesses experiencing hardship.
Apply here - Business Incubator Center Loans
Focuses on early-stage businesses in the Grand Junction area, offering loans and support programs.
Apply here - Rural Business Development Loans by USDA Colorado
Loans to support rural businesses, particularly those fostering economic development.
Apply here
These programs are designed to support diverse industries and needs, from startups to rural initiatives. Visit their websites for specific application requirements and deadlines.