When you decide to start or grow a small business in Tennessee, you may need access to capital. Regardless of the stage where you might be with your small business, funding is often required to ensure that you’re able to achieve goals both short and long term.
So, what are the best ways to gain access to working capital? How can you cover the financial needs of your business to ensure it thrives?
There are different options available including small business grants, small business loans, and private investors.
The financing option that is right for your business can depend on a range of factors including the general economic conditions, your business’ history, and how you plan to use the funds.
On this page:
- Tennessee Small Business Grants
- Tennessee Small Business Loans
- Investors in Tennesse
- Other Small Business Funding Sources
Tennessee Small Business Grants
A small business grant provides free money to businesses and organizations for specific purposes. Unlike small business loans, it doesn’t have to be repaid.
However, as with other states, most small business grants in Tennessee have strict eligibility requirements, and businesses that receive grants are responsible for showing their progress and how they used the funding.
Examples of TN small business grants include the following:
- FastTrack Infrastructure Program: This grant program is made to local communities to cover public infrastructure improvements that benefit companies that create jobs or make capital investments. This grant program requires matching funds from local communities.
- Tennessee Main Street: The Tennessee Main Street program is geared toward helping communities revitalize neighborhoods and commercial districts. There are various financial resources available through this program to help small business owners and entrepreneurs. The Main Street Entrepreneur Grant is available in amounts up to $50,000 for the entrepreneurial develop and reuse of commercial buildings in specific Main Street communities.
- Façade Improvement Program: As a part of the Tennessee Main Street Program, the Façade Improvement Program includes five grants of up to $100,000 for exterior improvements to commercial businesses.
- FastTrack Economic Development Program: This program offers a variety of loans and grants to help promote economic development. Grants and loans may be used for buying equipment, building repairs, improvements or other things related to either business expansion or relocation. Eligibility requirements indicate funds need to be used in a way that will have a significant economic impact on a community.
- Rural Business Development Grants: Rural Business Development Grants are offered by the federal government but administered by the state government. This small business grant in Tennessee is to promote either the development or expansion of small private businesses in rural areas. The business should employ (or plan to employ) 50 or fewer employees and have less than $1 million in gross revenue.
Small Business Loans in Tennessee
If you aren’t able to find a small business grant program that works for your needs, or you aren’t eligible, another financing option is small business loans in Tennessee. Of course, loans do have to be paid back with interest, but they offer some benefits over grant programs including the fact that in many cases the eligibility requirements aren’t as rigorous.
Here are some small business loans available to Tennessee businesses.
- Pathway Lending: Pathway Lending is a Tennessee small business loan company that offers lines of credit as well. Their loan amounts range from $5,000 to $5 million and have competitive interest rates. Loans are available only to people whose businesses operate in Tennessee, Alabama, or the greater Memphis Region. There are a variety of types of loans available from Pathway, including microloans for businesses in the very early stages.
- Volunteer State Bank: Volunteer State Bank offers a wide variety of business loans including Small Business Administration (SBA) loans, equipment loans, and business term loans. Volunteer State Bank is located in Middle Tennessee and their loans can be utilized for inventory, expansion, renovations, and working capital. Volunteer State Bank doesn’t list their terms, rates, and fees on their site, so interested business owners should contact the bank directly for more information.
- First Tennessee Bank: First Tennessee Bank advertises business loans with longer terms than other lenders and they are an SBA-preferred lender. One example of a loan available through First Tennessee is the 7A Loan, which is an SBA loan. The max loan amount is $5 million and the max term is typically 10 years.
- LiftFund: This is a nonprofit organization that works with business owners and entrepreneurs in Memphis and all of Tennessee who otherwise wouldn’t have access to capital. Small business loans are available up to $1 million and startup loans are available up to $50,000.
Small Business Investors in Tennessee
Tennessee businesses can also raise money through private investors, but there are potential downsides to consider.
Angel investors, for example, are people who invest in startups or small businesses to provide capital to launch them or grow them from their infancy. Angel investors are primarily looking for a higher rate of return than what they would earn by investing in other places. They often want to put money into businesses that are going to provide them returns of at least 25% down the road.
In exchange for the investment, you give up equity in your company which means you do give up partial control of it.
Another option is a venture capitalist. Venture capitalists have similarities to angel investors, but instead of using their own money, it’s usually a pool of money that comes from different sources such as pension funds or investment companies.
A few examples of small business investors in Tennessee include:
- Launch Tennessee: Launch Tennessee is a partnership between the public and private sector in TN. The organization aims to make Tennessee one of the most startup-friendly destinations in the country. Based in Knoxville, there are a variety of investment and funding resources available through Launch Tennessee.
- TNInvestCo: TNInvestCo was developed by the State of Tennessee and provides investment funding to businesses that are independently owned and operated and have no more than 100 employees. The business has to be headquartered in Tennessee, and at least 60% of employees have to be in Tennessee. The business has to be able to demonstrate high-growth potential for eligibility. The Tennessee Angel Fund is part of this program.
- Nashville Capital Network: The Nashville Capital Network is a group of around 100 investors that manage investment funds including the Tennessee Angel Fund, the NCN Angel Fund I, and the NCN Partners Fund. They work primarily with high-growth potential businesses trying to raise anywhere from $1 to $3 million in Series A financing. In some rare cases, they will also work with pre-revenue companies.
Other Sources of Small Business Funding
While local grant programs and lenders can be an excellent resource for people in Tennessee who are entrepreneurs and business owners, these aren’t the only options. There are online businesses that cater specifically to the needs of small business as well.
Here are some of our picks for the best online sources of small business funding, whether you’re in Tennessee or elsewhere.
Here is some more information about Fundbox:
- Credit lines are available up to $100,000 and origination fees start at a flat rate of 4.66% of the amount used with 12-week repayment terms
- If borrowers take the 24-week term option, their fee is 8.99% of the draw amount
- Minimum eligibility requirements include having a business checking account, having at least two months of activity in accounting software or three months in your business checking account, and your business being at least six months old
BlueVine, like Fundbox, offers invoice financing and business lines of credit. BlueVine was founded in 2013 and since then has provided an estimated $2 billion in funds to more than 15,000 small business owners.
Here are some details of some of the funding options available through BlueVine:
- Business lines of credit go up to $250,000
- Approval as fast as 10 minutes
- Fixed rates are as low as 4.8%
- Qualification for funding from BlueVine is based on business cash flow, customer strength, and personal credit history
- BlueVine looks for credit scores above 530 for invoice factoring and above 600 for business lines of credit
>> Read More: BlueVine vs. Fundbox for Small Businesses
Funding Circle offers small business loans as well as investment services. Details of their small business loans include:
- Fixed interest rates starting at 4.99%
- Loan amounts range from $25,000 to $500,000
- Terms range from six months to five years
- Apply online in 10 minutes and receive an answer within 24 hours
- Funding within as few as five days if approved
Getting Your Business Ready for Financing
There are some things you’ll need to have in place if you want to get financing for your Tennessee business.
The specific requirements that you’ll need to get your business ready for financing vary depending on your industry and the type of financing you’re applying for, but things most lenders want to see include:
- Know the specific reasons you want financing. A lender is going to want to know if you are looking for money to start a business, manage cash flow and expenses, or to grow.
- You’ll need to be ready to show your documents potentially including bank statements, tax returns, and other financial statements. A potential lender wants to see your cash flow and liquidity. If you’re just starting a business, it’s going to be very hard to get financing because you won’t have a history of cash flow to show. You may have to look at other options such as a microloan or a personal loan.
- Specific documents you’ll need include both business and personal tax returns and bank statements, business financial statements and any relevant business legal documents such as a copy of your commercial lease.
- If you’re going to apply for financing with a traditional bank, you will likely need a credit score of at least 680, and if you don’t have that you might think about a microlender or a small business loan provider that works with borrowers with bad credit.
- There is usually a minimum annual revenue requirement to qualify for the majority of small business loans. This can be anywhere from simply generating revenue or up to $150,000 or more.
What Kind of Financing Do You Need?
Since there are different kinds of business financing available, how do you know which one is right for your needs? The following are considerations to keep in mind.
- A working capital loan may be right for you if you want to increase your cash flow and manage day-to-day operating expenses such as purchasing inventory or payroll. These loans are usually short-term and can infuse an existing business with cash.
- Small Business Administration or SBA loans backed by the SBA but are from private lenders. These are secured loans, requiring collateral. These can cover a variety of purposes including new construction, buying real estate, or purchasing equipment.
- Invoice financing is also referred to as accounts receivable financing. The idea behind these loans is that you sell your unpaid invoices to a lender who pays you money upfront after a fee.
- If you’re a startup or a very small business, a microloan may be right. Microloans are usually short-term loans that are no more than $35,000 or so. You often do have to provide a business plan as well as financial statements to qualify.
- Business term loans are typically good for long-term growth, as compared to lines of credit which are better for short-term expenses.
If you’re looking at how to start a small business in Tennessee, carefully explore all of your financing and funding options to determine the right one or perhaps the right combination for your current and long-term needs.