Small Business Loans for Carpet Businesses

The state of your carpet business might be somewhat dependent on whether your revenue primarily comes from manufacturing, cleaning, or installation. Although all three of these carpeting services are large industries of their own, each has experienced gradual, years-long declines due to decreases in personal discretionary spending and corporate budgets alike which skip the carpeting for hardwood or tile flooring. These industries all share another common trait: Growth is soon expected.

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Although the carpet milling sector contracted 1.4% on average between 2016 and 2021, it is predicted to grow 1.6% through 2021. Likewise, the flooring installation industry contracted 2.3% on average during this period and is predicted to grow by 2.8% in 2021. And although the carpet cleaning industry experienced a 10.5% contraction in 2020 alone, growth is also expected for 2021 as offices reopen following the COVID-19 pandemic and thus seek carpet disinfection services.

These numbers at once put figures to any recent revenue gaps your carpet business has experienced and suggest that now might be the perfect time to seek additional funding. With potential growth opportunities right around the corner, small business loans for carpet business can prime your company for growth – below, learn more about your low-cost funding options.

Financing Options for Established Carpet Businesses During the COVID-19 Coronavirus Pandemic

In March 2020, the introduction of the federal CARES Act paved the way for the Paycheck Protection Program (PPP). This Small Business Administration (SBA) loan program, which the government created in response to the COVID-19 pandemic, provides additional small business funding for companies struggling in the wake of the COVID-19 economic crisis.

After the first round of PPP applications ended in August 2020, the December 2020 Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act greenlit a second round of PPP funding that began in January 2021. Any company that takes out a PPP loan during this second round can use its funds to cover additional expense categories beyond the first round’s payroll focus.

To learn more about how you can apply for and use PPP loans, please check our related articles listed below:

For regular updates on loan opportunities and forgiveness please check SmartBiz Loans COVID-19 information center.

Applying for a first or second PPP loan in 2021

The SmartBiz streamlined PPP Loan application can help you fill out your application, upload required documents, and submit them to the bank quickly.**

SmartBiz can help you apply for these funds. We have specialized in SBA loans since 2013 and our network of banks has funded nearly $4 billion in SBA, PPP, and bank term loans.

Whether this is your first or second PPP loan, SmartBiz can help! Businesses with less than 500 employees that are negatively impacted by the pandemic can apply for their first PPP loan.

The program expires on May 31, 2021. No applications will be accepted after that date. Keep an eye on the SmartBiz Small Business Blog for updated information about an extension if approved by congress.

Funding challenges and opportunities for carpet businesses

The financial ramifications of long-shrinking industries may present funding challenges for carpet business owners. Many loan providers may be disinclined to lend to borrowers who come from recently or currently declining sectors, especially those experiencing year-to-year decline like carpeting industries. Additional challenges can include owning a young company or not previously owning a business, as lenders often view inexperienced borrowers as high-risk.

On the other hand, the aforementioned predictions about carpet industry growth may persuade lenders that carpet business borrowers are smart to approve since their companies could soon grow and thereby facilitate easier loan repayment. It can be hard to say ahead of time whether lenders will see a more positive or negative outlook for an industry or specific borrower, so the best way to find out may be to start applying for loans. Below, learn all about several available small business loans for carpet businesses.

Funding options for carpet businesses

To obtain small business loans for your carpet businesses, you can apply for government funding such as SBA loans or non-government funding such as bank term loans. No two loans work quite the same, but you can get a sense of what to expect via the below guidelines.

The SBA 7(a) loan program

Many, if not most, business finance experts view low-cost SBA 7(a) loans as the best small business funding option given their long terms, low rates, and low monthly payments. You can use SBA 7(a) loans to:

  • Obtain Working Capital Working capital may be the single most important indicator of your carpet business’s financial state. To calculate it, either subtract your current liabilities from your current assets or count the cash your business has on hand. A negative value indicates a need to grow your assets, and you should do so through employee hires or equipment purchases. You can use your SBA 7(a) loans for both these purposes.
  • Consolidate Your Debts – SBA 7(a) debt consolidation loans can be used to refinance your carpet business’s loans, including merchant cash advances, daily or weekly payment loans, short-term business loans, and high-interest business loans.
  • Purchase Commercial Real Estate – SBA 7(a) loan proceeds can go toward owner-occupied commercial real estate purchases, and similarly, you can use your loan proceeds to refinance your current commercial real estate mortgages.

Advantages of SBA 7(a) loans for carpet businesses

SBA 7(a) loans are widely viewed as the “gold standard” in small business funding due to their:

  • Lack of prepayment penalties
  • 10-year terms (25 years for commercial real estate loans)
  • Affordable monthly payments
  • Wide use of funds
  • Low rates
  • Availability in all 50 states

Requirements for carpet businesses to apply for SBA 7(a) loans

To qualify for SBA 7(a) loans, you and your carpet business must meet all the below requirements:

  • Your business must be based in the U.S.
  • Your business must not have tax liens, outstanding charge-offs, or recent settlements
  • Your company must be at least two years old
  • You and your company must be on-schedule with all government-related loan repayments
  • You must be at least 21 years old
  • You must be a U.S. citizen or lawful permanent resident
  • You must not have bankruptcies or foreclosures in the past three years
  • You must have a personal credit score of at least 650

Additionally, some lenders have additional requirements, such as the presentation of a business plan. This requirement is not universal – in fact, SmartBiz Loans does not impose it.

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How to apply for an SBA 7(a) loan for carpet businesses

Step 1: First, make sure that you and your carpet business do indeed meet the above SBA 7(a) loan requirements. If not, you can pursue non-government funding options instead, or you can work toward eventually qualifying for an SBA 7(a) loan. Learn more about SBA 7(a) loan requirements via the SmartBiz Loans guide to SBA Loan Requirements for Existing Businesses.

To discover how your business financials stack up for funding, use our easy-to-use online tool. SmartBiz Advisor™ helps you track the financial health of your business and learn how banks typically evaluate your business.* SmartBiz Advisor also recommends ways to help you improve your credit and strengthen the financial health of your business as needed. Read feedback from real SmartBiz Advisor users and sign up here.*

Step 2: If you do qualify for SBA 7(a) loans, then gather all your required paperwork once you’re ready to apply. Since doing so can be onerous, you may want to have your bookkeeper, accountant, or another financial expert assist. Learn more about SBA 7(a) loan paperwork requirements via the SmartBiz Loans Guide to SBA Loans.

Step 3:  Choose your lender. The following factors are the most important:

Clear loan terms

Your loan’s fine print should be perfectly clear. If it isn’t, you could get stuck with unfavorable costs and payment schedules of which you weren’t aware. Make sure to ask your lender about potential total loan amounts, collateral requirements, prepayment penalties, and payment frequencies and amounts. If you hear mostly vague or unhelpful answers, you may want to look elsewhere for your funding.

Reviews

Before contacting a lender, browse the lender’s Google, Consumer Affairs, and TrustPilot reviews. Confirm that you’re reading reviews from actual customers, and try to find reviews from other carpet businesses since their experiences may most closely resemble yours.

Availability

Your lender should assign you a representative who has taken the time to go over your application, learn about your carpet business, and understand the intricacies of the carpeting industry. You should be able to reach this representative regularly via email or phone.

Fees

Your loan will likely include repayment fees and interest fees, but it should not contain many other fees. A substantial number of additional fees may be a sign to choose a different lender. You should also verify that all loan fees are due before your loan’s funding and during your loan’s lifetime.

Transparency

A simple fee structure should be just the start of your loan’s transparency. Check for a clearly stated interest rate and APR – in many cases, attempts to obscure these figures mean that your lender will not clearly outline other key loan terms.

The SBA 504 loan program

Small businesses such as carpet businesses can apply for the SBA 504 loan program to finance their modernization or expansion projects. SBA 504 loan proceeds can be used to hire new employees, open new locations, or upgrade equipment.

SBA 504 loans can notably reduce your expansion or modernization costs if your carpet business falls within the public policy goals of your local community development corporation (CDC). In this case, your SBA 504 loan may cover up to 50% of your project costs, and your CDC may cover up to 40%. As such, your immediate out-of-pocket expansion or modernization project costs could be as little as 10%.

The SBA microloan program

If your carpet company is a very small business (a.k.a. microbusiness) according to SBA guidelines, you may qualify for the SBA Microloan Program. If approved, your carpet business will receive an SBA microloan of up to $50,000. You can use this loan to cover all business costs other than commercial real estate purchases and debt payments.

Non-SBA loans and other funding options

SBA loans, while ideal for small businesses, can be unattainable for some companies. That’s why other options exist, though these alternatives may have shorter terms, larger payments, and higher rates. These alternatives include:

Bank term loans

Usually, bank term loans are approved as quickly as are SBA loans. However, bank term loans usually have higher rates, shorter terms, and prepayment penalties along with lower amounts. They can be used to refinance debts and obtain working capital.

Business lines of credit

A business line of credit is a revolving credit line with a maximum amount proportional to your credit score though usually lower than that of a bank term loan. Business credit lines also differ from bank term loans in that only the latter requires full use of all funds. Additionally, business credit lines only charge interest on funds you actually use.

You can access your business credit line as often as you need until its funds run out, and you usually don’t need to put up collateral for business credit line approval. Learn more about business credit lines via the SmartBiz Loans blog Small Business Lines of Credit Pros and Cons.

Business credit lines resemble business credit cards in many ways, but two key differences separate these loan types. The first difference is that upon your business credit line depleting; you cannot reuse it. The second is that business credit cards may include spending rewards, whereas business lines of credit do not. Read more via the SmartBiz Loans blog Finding the Right Credit Card for Your Small Business.

Merchant cash advances

If your carpet business accepts card payments, you can likely apply for merchant cash advances (MCAs), which card providers issue directly to small business owners. To repay your MCA, you can either funnel a small amount of all your card transactions to your lender or set up a traditional installment-based plan.

MCAs often facilitate easy loan repayment, but they typically have extremely high APRs. Learn more via the SmartBiz Loans blog What You Need to Know About an MCA.

Why Choose SmartBiz Loans?

Need funding to rebuild your business? Don’t waste time going from bank-to-bank filling out multiple applications. SmartBiz helps you find the best financing for your unique needs whether that’s an SBA loan, Bank Term loan, or other financing.  About 90% of qualified applications we refer to banks are funded and our financial professionals are on hand to answer your questions. Discover if you’re pre-qualified here without impacting your credit scores** and read the SmartBiz 5-star customer service reviews on TrustPilot.

 *The information provided through SmartBiz Advisor, including the Loan Ready Score, is for educational purposes only. SmartBiz Advisor is not a financial or legal advisor as defined under federal or state law. Use of this information is not a replacement for personal, professional advice or assistance regarding your finances or credit history.

**We conduct a soft credit pull that will not affect your credit score. However, in processing your loan application, the lenders with whom we work will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and happens after your application is in the funding process and matched with a lender who is likely to fund your loan.

 What you need to know: The information provided through SmartBiz® University and the articles contained therein are for educational purposes only. Use of this information is not a replacement for personal, professional advice or assistance regarding your finances or credit history.