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Tennessee Small Business Loans

According to state government figures, at the end of Quarter 1 2020, there were 156,766 small businesses in Tennessee employing five or fewer individuals. That represents an increase of 13.6% from 2015. This makes Tennessee a promising place to start or expand a small business.

Written by Tetiana Sitiugina-Babiuk - Independent writer and content strategist, updated on 9/10/2021

At a glance Statistics from 2020, reported by the U.S. Small Business Administration (SBA), show that 451 loans were approved in the state of Tennessee, with an average loan amount equaling $535,794.57. This article provides an overview of Tennessee’s top small business loans. We will also discuss some of the best traditional lenders, show you how to prepare for your loan application, and provide you with the top recommended online lenders.

Top 4 Tennessee Small Business Loan Options

Let’s begin by summarizing four of the top lenders offering small business loans to Tennessee-based companies. 

1. First Horizon Bank

First Horizon has 16 branches across the state, so they truly are a local lender and are suitable for Tennessee businesses. They offer secured and unsecured term loans. You can borrow up to $3m with a secured loan, while you only borrow up to $500,000 with an unsecured loan.

Fixed or variable interest rates are available, and repayment periods can extend up to 84 months.

According to figures from the U.S. Small Business Administration in 2020, First Horizon was the third-biggest lender of SBA 7(a) loans with a total of $18,923,800 in loans lent to small businesses in Tennessee. The average approved amount was $2.1m, which came with an average interest rate of 6.8%.

2. Pathway Lending

Pathway Lending is an economic development agency that was founded in 1999 with a goal to increase access to capital for Tennessee-based businesses. Certified as a Community Development Financial Institution in 2002, Pathway Lending has been successfully providing educational services and capital resources to businesses throughout the state.

Pathway Lending offers flexible loans ranging from $5,000 to $5 million, with loan-to-value ratios of up to 100 percent and longer payback periods. As such, you can choose among the following types of loans:

  • Microloans. Microloans are ideal for young businesses who need permanent equipment, inventory, or working capital. When you receive a microloan from Pathway Lending, you will be partnered with a member of their Advisory Services team, which can prove to be an incredibly valuable resource to help you effectively manage the loan.
  • Term loans for working capital and growth. This type of loan is designed to help business owners with developing, growing, and sustaining their business.
  • Equipment loans. Pathway Lending provides up to 100% project financing to give small business owners an opportunity to purchase the equipment necessary for business expansion
  • Other loans. Pathway Lending also offers commercial real estate loans, accounts receivable financing, energy efficiency and renewable loans, revolving lines of credit, and more.

3. Eastman Credit Union (ECU)

Eastman Credit Union is one of the largest credit unions in Tennessee, with over 220,000 members in cities including Johnson City, Bristol, and Kingsport.

ECU provides Tennessee-based small business owners with financial solutions customized to fit the specific business needs. These include:

  • Commercial real estate loans. Commercial real estate loans provide the funding necessary for small businesses to expand their current building or purchase a new location.
    Investment property loans. ECU offers a number of flexible solutions for purchasing a variety of investment property types. These loans come with fixed rates on terms up to 10 and 15 years.
    Other loans. In addition, ECU offers business lines of credit (short-term unsecured lines of credit and long-term real estate secured), equipment and vehicle loans, construction loans, and more

4. Citizens Bank

Citizens Bank typically lends up to $250,000. This can make repayment amounts more manageable, and suitable for new businesses or existing businesses in need of a modest cash injection. They offer the flexibility of both fixed and variable interest rates.

The bank has a very quick response time and generally promises a decision within three days for term loans up to $250,000.

The average loan amount approved by the bank in 2020 was $739,000, with an average initial interest rate of 5.9%, putting Citizens Bank slightly ahead of the competition.

The following tables, summarize two aspects of the lending activities of the banks featured above – business term loans and SBA 7(a)s.

Small Business Loans from Conventional Lenders

Lender

Min. Amount

Max. Amount

Max. Term (months)

Rates

First Horizon Bank

$ 25k

$ 3m

84

Fixed/Variable

Pathway Lending

$5,000

$5,000,000

Not given

Not given

Eastman Credit Union

Not given

Not given

Not given

Fixed for investment property loans

Citizens Bank

Not given

$250,000

84

Fixed/Variable

Top Online Tennessee Small Business Loan Options

Depending upon your personal and business situation, it may not always be possible or preferable to obtain a loan from a traditional lender. Application procedures can be drawn-out, with decisions sometimes taking up to 40 days.

Online lenders usually have higher charges and interest rates, but their application and approval processes are usually much faster. Following approval, fund transfers are usually fast, too, sometimes you will even get approval on the same day.

Here are four of the best online lending options to consider.

1. Fundbox - Best for Line Of Credit

With Fundbox, it’s possible to secure a term loan even if you have a new business with a limited credit history. A benefit of Fundbox is that it doesn’t charge an origination fee.

With Fundbox you can borrow up to $150,000 with a repayment period of 24 or 52 weeks. If you find yourself being able to pay the loan off early, there’s no penalty for doing so.

The application process is quickest if you connect your checking account (and your accounting software) to Fundbox’s system. This gives them immediate access to the

information they need to form a quick decision.

Any loan offer is valid for 30 days, and once you‘ve accepted it, the agreed funds can be transferred to you as quickly as the next business day.

2. Credibly

Credibly is a trusted online lender that has been offering loans to small- and medium-sized businesses around the country for over 10 years. The goal of the company is to open financing opportunities to a wide customer base, - hence, Credibly offers rather lenient eligibility requirements. For example, the minimum credit score required to apply for a small business loan through the platform is only 500. The application process itself is easy and quick, with the dedicated customer care team ready to support you every step of the way.

With Credibly, you have seven small business loan options to choose from, which range from $400,000 for shorter-term loans to $5,000,000 for longer-term ones. Among the most popular products is a working capital loan. Here, instead of paying interest rate fees as with a standard term loan, you would need to pay a pre-determined lump percentage of the total loan value.

Other loan types offered by Credibly include long-term business expansion loans, SBA loans, lines of credit, merchant cash advances, and more.

Credibly review

3. Fora Financial

Offering small business loans to Tennessee-based companies since 2008, Fora Financial has deserved a solid reputation as a fintech lender providing reliable and convenient online loan solutions.

The company offers short-term loans and merchant cash advances to small businesses operating in a broad range of industries. Here, the loan amounts can range anywhere between $5,000 and $500,000. The online approval process takes only 24 hours, with funding being disbursed in the next three business days.

In order to qualify for a small business loan from Fora Financial, you need to ensure that you have no open or unsettled bankruptcies, have been in operation for six months or more, and have annual revenue of at least $12,000. If you meet the criteria, you can submit a quick one-page online application, upload supporting documentation, and wait for the decision to be made.

4. Fundera

Like Lending Club, Fundera seeks to personalize your online term loan application experience by providing you with a personal advisor.

Out of our four top online lenders, Fundera has the highest maximum borrowing amount - at $600,000. You will need to make repayments over a five year (maximum) period. The payment structure is fixed from the beginning, which makes it easier to plan your company’s cash flow. While it’s great that Fundera offers a higher borrowing amount, collateral is usually required.

Fundera demands less paperwork than traditional lenders, which naturally speeds up the process.

Tennessee Small Business Grants

Tennessee is one of the best states to get a small business loan. However, if taking a loan isn’t your preferred option, it’s worth knowing that Tennessee has several different grant schemes. However, they are all sector-specific and are mostly for organizations that are in the community or heritage sectors.

It’s also worth noting that the state of Tennessee doesn’t provide financial assistance directly to businesses that are starting up or expanding. Instead, the state offers financial assistance to organizations that support small businesses. This normally includes organizations that provide training, technical support, and financing to such companies.

However, it never hurts to explore your options. Some of the grants available to small businesses in Tennessee include:

1. Tennessee Valley Federal Credit Union Idea Leap Grant

The Tennessee Valley Federal Credit Union (TVDCU) offers several grant options for small businesses within the state through the Idea Leap Grant program. Through the program, five winners receive grants valued at between $2,500 and $20,000 to help them grow their small businesses.

The grant is suitable for for-profit companies operating in TVFCU’s 13-county community, with 2 to 20 employees on the payroll, and annual revenue of under $1.5 million.

2. FastTrack Job Training Assistance Program

The FastTrack Job Training Assistance Program is offered by the Tennessee Department of Economic & Community Development with the goal to help new and expanding businesses in training full-time employees.

The amount of funding you can receive is determined by multiple factors, including:

  • Number of new full-time jobs
  • Wages of new full-time jobs
  • Amount of company investment
  • Types of knowledge and skills that need to be obtained
  • Location of the business

3. Launch Tennessee Microgrants Program

If you are planning to apply for one of the small business grants or awards, you may qualify for additional financial support through Launch Tennessee. The program aims to assist Tennessee-based early-stage companies that are developing new technology with the goal of advancing it into the marketplace. As such, through the Launch Tennessee program, you can receive funds to be used for grant-writing assistance.

Keep in mind that to qualify for the program, your company must be referred by one of the members of the Launch Tennessee network, such as an accredited angel investor or a lead mentor.

How to Prepare for a Tennessee Small Business Loan

Every loan provider has different requirements, so what are the small business loan requirements in Tennessee?

Although they are broadly the same, there can be differences. For example, the credit score and time in business required may differ from lender to lender.   

Here are some things you can do that are fundamental to any loan application anywhere:

  • Check the requirements of each lender that you’re going to approach
  • Do everything possible to improve your personal and business credit scores
  • Prepare a business plan
  • Understand what each lender will allow you to borrow money for
  • If your company is already up and running, have financial reports available
  • Ensure that your business is registered in Tennessee. Either open it in the state or relocate it there.

The Bottom Line

As with many areas of business, there are offline and online options. Lenders such as banks and credit unions with physical branches are the traditional sources of small business loans. However, the requirements of these institutions are usually quite demanding.

Conversely, online lenders will generally accept borrowers who would normally be considered high risk by the main lenders. Online lenders will often be more relaxed on issues such as documentation and credit scores, which makes it easier to get the funding that you need for your business.

However, online lenders will often have higher charges and interest rates in exchange for the higher perceived risk.

The other disadvantage of mainstream lenders is that the application and approval process can take a long time, whereas some online lenders can give you a decision within minutes. In some cases, they even transfer the funds to you on the same day.

If you want to maintain the momentum you need to open and grow your business, it can be worth applying to online lenders, as online lenders are generally more flexible.