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Indiana Business Loans: Financing For Hoosier State Small Businesses

Loans For Indiana Businesses

The midwestern state of Indiana has always been well known for its mass production of large agricultural crops, such as corn and soy – but today, Hoosiers everywhere are realizing the various business potentials flooding the state. With multiple large tech-driven colleges throughout the state of Indiana, the development of innovative, technological entrepreneurs is flourishing. In addition, the extremely low cost of living and low business related costs and taxes, small business owners throughout the state are reaping the rewards.

According to the annual Small Business Profile from the Small Business Administration, there are over 493,000 small businesses in Indiana, with over 106,000 of those small businesses having at least one employee. This leaves over 387,000 vital small Indiana businesses without employees. These vital small businesses throughout the state of Indiana have allowed the overall state’s economy to flourish throughout 2013 and 2014. Even though 2013 was a slower year for small businesses in Indiana, the state’s real gross domestic product increased by 2.1 percent. For comparison, the overall United States gross domestic product was 2.2 percent.

In addition to a growing gross domestic product, the small business sector in Indiana has dramatically improved the unemployment rate throughout the state. During 2013 and 2014, the United States overall unemployment rate was around 5.8 percent, whereas Indiana’s unemployment rate at the beginning of 2013 was an overwhelming 7.1 percent. By the end of October 2014 however, the unemployment rate in Indiana lowered just below the United States unemployment average to 5.7 percent.

While the unemployment rate has continued to lower, a majority of these numbers are largely due to the small businesses throughout the state. In 2012 alone, Indiana’s small businesses employed about half of the state’s private workforce. Overall, almost all firms with employees throughout Indiana are small businesses, which means that 97.2 percent of all employers in the state own and operate small businesses in Indiana.

Not only has Indiana’s small business owners drastically improved the state’s unemployment rate and overall gross domestic product, but these small business owners have been crucial in increasing the diversity amongst business owners and employees.

The Benefits of Running a Business in Indiana

Running a small business in the state of Indiana can be incredibly taxing at times, but Indiana also has plenty of benefits for owning and operating a business in the state. Some of the biggest benefits of running a small business in the state of Indiana include:

  • Diverse, Strong Labor Market: As mentioned above, the state of Indiana has plenty of well-known, strong technology oriented Universities. This large concentration of technology related backgrounds has allowed the labor market in Indiana to continuously grow and flourish, which in turn has opened many possibilities for Indiana entrepreneurs. The continuously growing labor pool has also helped contribute to the rapidly declining unemployment rate throughout the state of Indiana, while giving hope and optimism to many small Indiana business owners.
  • Low Costs of Living and Low Tax Rates: Compared nationally, Indiana is one of the cheapest states to live in, with Indiana’s cost of living remaining around 14 percent lower than the national average; this then contributes to the low per-capita personal income throughout the state of Indiana. This has also allowed Indiana to create a low burden and reasonably affordable tax system throughout the state. In Indiana, the personal income tax rate is 3.3 percent, the corporate income tax rate is 8 percent, and the sales tax rate is 7 percent. While the sales tax rate is a little higher than average, it is still considered low in comparison to surrounding midwestern states. Overall, these low costs of living, labor costs, and tax rates has allowed small business owners to flourish.
  • Slow Economic Growth, but Stable: Even during the Great Recession in 2008, the state of Indiana was able to keep their local economy steady. While there were difficult times for all business owners during the years of the Great Recession, the state of Indiana has been able to remain consistent, allowing business owners to easily predict the fluctuations in economic growth.

The Challenges of Running a Business in Indiana

Hoosier’s are lucky enough to enjoy many benefits when owning a small business in Indiana, however every state comes with its own difficulties. Some of the most common challenges of operating a small business in Indiana include:

  • Lacking Access to Large Costal Markets: Costal markets are a huge benefit to any business owner when living in states like California or Florida, but unfortunately, the Midwest states are isolated from these valuable markets. This has led to many issues for small business owners in Indiana because they are so far from major bustling business cities. This has led to Indiana business owners struggling to find access to important business essentials such as easy access to capital.
  • Inefficient Workforce Development Programs: Overall, Indiana business owners are thriving due to the rapidly growing skilled labor force, however, there are many pointless and expensive workforce development programs throughout the state that are not running effectively. This has inhibited growth for many potential employees that do not have college degrees, which in turn, limits the labor pool for jobs outside of highly skilled technology driven companies. The local government in Indiana is finally realizing the harm these inefficient programs have caused and are working hard to find other solutions to help with workforce development throughout the state of Indiana.

Types of Indiana Business Loans

  • SBA Loans: getting an Indiana business loan from a SBA bank is a great source of financing for a growing or established Indiana business. SBA loans can be used for a variety of business uses, including purchasing or acquiring a new or existing business, purchasing or refinancing real estate, construction or build-outs, and general working capital uses. What makes a SBA business loan different than a loan offered by conventional bank lenders is the fact that the government guarantees SBA loans. This ensures the SBA lender that if the borrower fails to repay, the Indiana SBA lender will have most of their losses covered by the Small Business Administration.
  • Bank Loans: a conventional bank business term loan or line of credit is a exceptional form of financing for Indiana small businesses. Quite simply, banks offer the very best rates and terms available among all commercial lenders. But banks are able to offer such good rates because they aren’t willing to take much risk. Therefore, if you have bad credit, or if your company is new and doesn’t have the documentation to show your growth and profitability, you’ll find it hard to obtain true bank-rate business financing.
  • Fintech Loans: These are loans offered mostly by online business lenders who have leveraged technology to help underwrite loans. Since a fintech or marketplace business lender uses new technologies to underwrite their loans, they are able to offer quick financing at affordable rates. When an Indiana small business applies for a mid prime alternative marketplace loan, they are usually able to see if they qualify within minutes, and can fund in less than a week. Uses for alternative loans include working capital, expansion funding, payroll financing, emergency business uses and operating capital.
  • Asset Based Loans: If a company has limited or poor credit, or has had an issue with profitability or cash-flow in the recent times, an option for Indiana businesses to obtain working capital could be to use their business assets as collateral for financing. With an ABL, a small business can monetize their outstanding accounts receivables, commercial or personal real estate, invoices, inventory or equipment to obtain capital.
  • Equipment Leasing: if you’re an Indiana business that needs crucial business equipment, but don’t have the resources to purchase the equipment outright, or don’t want to purchase the equipment because you don’t want to be stuck with outdated equipment in a few years, a good option could be to lease the equipment rather than buy. With equipment leasing, the leasing company will purchase the equipment for you, and then lease it to you for a period of time (with an option to buy at the end of the lease).
  • Private Business Loans: non-bank business lenders are able to offer flexible and creative financing options for just about any small business that has shown profitability or has commercial real estate in which they’re willing to leverage existing equity.
  • Merchant Cash Advances: this form of fast business funding is the sale of future business receivables at a discount to the funding company. A business will provide an application and bank statements to the funder, and then the funder will then provide an offer. If the merchant accepts the offer, they will be required to provide a few additional documents, and then funding occurs. The entire process can be as quick as a couple of hours.

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