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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:
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, small business loans in Tennessee can be an alternative. 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 online small business loans available to Tennessee businesses.
As low as 6.00%
$5,000 – $2 million
1 – 5 years
The above information is for the Lendio Business Term Loan.
Lendio is the largest small business loan marketplace in the U.S. with a network of over 300+ lenders. These lenders include PayPal, Bank of America, American Express, and more.
The application process can be completed online in 15 minutes with no fee or obligation. There is also no impact on your credit. If approved, funds can be made available in as little as 24 hours.
- Short term loan
- Business term loan
- Business line of credit
- Merchant cash advance
- Business credit card
- Equipment financing
- Commercial mortgage
- Startup loan
- SBA loans
- Accounts receivable financing
- Business acquisition loan
9.77% – 35.98%
$5,000 – $500,000
6 – 60 months
The information above is for the LendingClub Business Term Loan.
LendingClub is a peer-to-peer lender that connects investors with businesses in need of financing. To be eligible, businesses must have at least $50,000 in annual sales, as well as been in business for 12 months or more.
You can apply online in under 5 minutes and receive multiple quotes. If you decide to pay off your loan early, there are no prepayment fees to worry about.
7.00% – 69.00%
$500 – $250,000
6, 12, or 18 months
The information above is for the Kabbage Business Line of Credit.
Kabbage is a small business lender offering a business line of credit. The lender has a low minimum loan amount which can make it a good option for those in need of a small amount of financing.
In order to be eligible, your business needs to be at least 12 months old, with $50,000 in annual revenue.
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 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.
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.
Author: Ashley Sutphin