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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.

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 SBA lenders. These lenders also offer business term loans. 

Of our top 4, only First Horizon has branches in Tennessee, but that doesn’t prevent the others from being good options for small business funding. Of the 84 lenders that approved SBA loans in 2020, these four providers accounted for over 10% of the total amount approved. This indicates that they have the resources and flexibility to support small businesses.

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. People's United Bank

People’s Bank provides business term loans of up to $1.5m. Although they do offer a lower borrowing limit, they also offer repayment periods of over ten years at a fixed interest rate. Payments can be fixed or flexible, depending on the requirements of each individual application. If you want to borrow a relatively small amount of money, People’s Bank may be a good option.  

In 2020, in relation to SBA loans, People’s Bank’s average loan amount was $3.6m, and its average initial interest rate was 5% (significantly below the average interest rate). This makes an SBA loan with People's United bank an attractive option for those who qualify.   

3. Umpqua Bank

Umpqua Bank is relatively new to the market, having opened its doors in 1953. Umpqua started out as a community bank and still strives to maintain that ethos and customer experience.

Business term loans with Umpqua Bank start at $10,000 and max out at $1m. Payments can be made over 84 months, and the only interest rate option available is a fixed rate.

In 2020, Umpqua had the seventh-highest average approval amount for SBAs at $2.6m, well above the average of $676k (across all 84 SBA lenders). Their average initial interest rate of 6% was slightly below the average.

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%. Puting 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.

Business Term Loans

Lender

Min. Amount

Max. Amount

Max. Term (months)

Rates

First Horizon Bank

$ 25k

$ 3m

84

Fixed/Variable

People's United Bank

Not given

$ 1.5m

120

Fixed

Umpqua Bank

$ 10k

$ 1m

84

Fixed

Citizens Bank

Not given

$ 250k

84

Fixed/Variable



SBA 7(a) Loans 2020

Lender

Total Amount Approved

Average Amount Approved

Average Initial Interest Rate

First Horizon Bank

$ 18,941,000.00

$ 2,104,555.56

6.78%

People's United Bank

$ 3,655,000.00

$ 3,655,000.00

5%

Umpqua Bank

$ 2,668,500.00

$ 2,668,500.00

6%

Citizens Bank

$ 4,435,000.00

$ 739,166.67

5.9%

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. Ondeck

Ondeck may suit you if you have a new business, as Ondeck informs credit agencies if you manage your loan well. This can help you build up your business’s credit history. 

The maximum term loan amount is $250,000, but the relatively short maximum repayment period of 18 months may deter businesses who want to spread their loan payments over a longer period. However, monthly payment amounts are fixed, which may help you maintain a steady cash flow.  

Ondeck advertises zero penalties for early repayment. However, access to this benefit is extremely limited and it is generally only available to businesses that have shown an excellent payment history in relation to previous Ondeck loans.

3. Lending Club

Lending Club is not as suitable for new businesses as the previous two lenders in this list. This is because to qualify for a term loan you have to have been in business for at least one year and have at least $50,000 in annual sales. However, if you do qualify for a term loan, Lending Club is a good option.  

The maximum loan amount is $500,000, which can be repaid over 5 years, with fixed rates and no early payment penalty. Lending Club provides a dedicated client advisor to help you every step of the way.

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. 

Additional Tennessee Small Business Financial Resources

Tennessee is one of the best states to get an SBA loan. Yet, SBA loan approval may be skewed because the state guarantees a large proportion of these loans. 

If taking a loan isn’t your preferred option, it’s worth knowing that Tennessee has ten 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 provides financial assistance to organizations that support small businesses. This normally includes organizations that provide training, technical support, and financing to such companies. 

The few Tennessee grants awarded by Tennessee are usually to non-profit organizations that support businesses. In addition, the state issues grants to companies in specific fields such as R&D and technology.  

Other Resources for Tennessee Small Businesses

Tennessee small business grants are difficult to obtain because they are sector-specific and because of their popularity.

The Center for Industrial Services is a key component of Tennessee’s business development strategy.

It provides technical and management training to private businesses and the Tennessee government to support business development.

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.