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While getting a business loan can mean receiving a sudden, large influx of cash, this money is not considered income, since you’ll be paying it back. As a result, you don’t need to pay income taxes on a business loan. In fact, borrowing money to back-up your business can actually lower your tax liability, since you can typically deduct the interest you pay as a business expense.

There are some exceptions to these rules, however, so read on to learn more about how financing can impact your taxes, along with other important things to keep in mind when filing your business tax return this year.

Do Business Loans Count as Income? The Short Answer

No, business loans do not usually count as income, since this is money that you will be paying back. So while getting a small business loan of, let’s say $100,000, puts money in your business bank account, you’ll be returning that money — along with interest — over time, so it’s not actually considered income.

Do Business Loans Count as Income? The Long Answer

In general, a business loan is not considered income. Unlike revenue generated from sales or services, a loan is a form of borrowed money that needs to be repaid. It provides your business with the needed capital to invest in operations, inventory, equipment, or other business needs. But it does not increase your company’s revenue or profit. In fact, a business loan is considered a liability on your business’s balance sheet.

Because a business loan is not an inflow of funds from regular business operations, it is not considered taxable income.

There is one notable exception, however. If you negotiate with a creditor or lender to reduce your debt, any amount of debt that is forgiven is considered income and you will owe taxes on the amount. So, even though you didn’t pay taxes on it when you received the funds, the act of forgiveness changes it from a loan to income.
Also keep in mind that alternative financing options, such as crowdfunding, grants, or equity investments, may not be considered loans and could have different tax implications. These sources of funding may have their own specific rules, so it’s important to understand how they may impact your business’s tax situation.

Recommended: Loan to Your Own LLC

How Small Business Loans Affect Taxes

While you don’t typically pay income tax on a loan, getting a small business loan can still have an impact on your taxes. Here’s how.

Interest Repayment

The way a small business loan works is that when you are paying it back, your loan payments are typically split between paying interest and paying down the loan principal.

The part of your payment that goes principal is not tax deductible. But the part you pay toward interest typically is tax deductible, which means it can reduce your taxable income and allow you to pay less in taxes than you otherwise would.

In order to take advantage of this tax deduction, however, you must have a true debtor-creditor relationship with the lenders (money you borrow from friends and family doesn’t count, even if you are paying them interest).
In addition, the money you borrowed must be used for assets and expenditures necessary to operate your business. If you spend the money in other ways or the loan proceeds are sitting in your business bank account, the interest will not be a deductible business expense.

Common Business Expenses You Can Write Off

In addition to interest on business loans, other expenses that are ordinary and necessary to keep your business running are also likely to be deductible. Here’s a look at some common small business write-offs you won’t want to miss.

•  Home office: If you are working from home in an area that’s only used for your business, you can usually deduct home-related expenses for that space — rent or mortgage payments, utilities, and more.

•  Commercial rent: If you rent office space, these money payments will most likely be deductible.
Utilities: Expenses like phone, electricity, and internet for your business typically qualify as business expenses.

•  Employee salaries: Whether you pay full-time, part-time, or contract help, employee salaries are generally deductible as a business expense.

•  Marketing: Money you invest in advertising, content marketing, and social media management is generally considered a deductible business expense.
Office supplies and equipment: This includes computers, printers, paper clips, paper, pens, and anything you need to conduct your business.

•  Professional dues: Membership fees or dues you pay to trade boards, business leagues, civic or public service organizations, bar associations, etc., can usually be written off as a business expense as long as the membership is required for (or helps you perform) your business duties.

•  Software: Your business can typically write off software programs you bought or subscribe to, such as Microsoft Office or Adobe Creative Suite.

•  Mileage: If your business involves traveling by car, you can likely write off some of those expenses, including mileage, tolls, and parking, though you’ll need to keep careful track during the year.

•  Entertaining clients: Taking a client out for a meal at a restaurant (that isn’t lavish) where work is discussed is 50% deductible in 2024.

The key to claiming business deductions is to keep detailed records of all your expenses, being careful to always separate business and personal expenses.

Recommended: When to Pay Business Taxes

Common Business Expenses You Can’t Write Off

There are certain business expenses that, while they may seem ordinary and necessary, are not deductible. Here are some to keep in mind when filing your business taxes.

•  Expensive gifts to clients: Gifts given to your clients or customers are only deductible up to $25 a person.

•  Entertaining clients: Taking clients out to the theater or for a day of golfing is not deductible.

•  Commuting expenses: Driving your personal car to and from work every day or taking public transportation is not deductible.

•  Contributions to political parties or candidates: You may feel strongly about and support a local political candidate. That person may plan to invest in your industry. Even so, contributions to that candidate’s campaign are not tax deductible business expenses.

•  Membership fees to social clubs: Even if the members may be clients or potential clients, membership fees to social or country clubs are not typically deductible.

Here’s a quick comparison of expenses that you can and can not write off.

Personal Tax Returns vs Business Tax Returns

If you started a business this year, you may wonder how filing your business taxes differs from filing your personal taxes. Here’s a look at how the two compare.

Similarities

If you operate your business as a sole proprietor, little will look different in how you file taxes. You’ll file your business income along with all your other income as personal income on IRS Form 1040.

The same goes for businesses with pass-through structures (meaning business income is passed-through to the owner), which include general partnerships, limited liability companies (LLCs), and S corporations.

The tax rate is also the same: For tax year 2024, it ranges from 10% to 37% percent. (You may also need to pay an additional 15.3% self-employment tax on income from your business.)

Your tax return may also be due at the same time. The tax-filing date for self-employed people, independent contractors, and gig workers is the same as it is for individuals – around April 15.

Recommended: What Happens If I Miss the Tax Filing Deadline?

Differences

When you own a business, there may be additional tax forms you need to fill out besides Form 1040. Which ones depend on how your business is structured. C corporation owners file Form 1120, while S corporation owners must submit Form 1120S. Partnerships file an informational return known as Form 1065.

If you have an LLC and want to be treated as a corporation or partnership for tax purposes, you will use Form 1120 or Form 1065 for your business taxes.

Depending on your business structure, tax rates for your business income may differ from personal income. If you have formally established a corporate entity, there is a flat federal tax rate of 21% on business income no matter how much your business earns.

Tax return due dates may also differ. If your business is structured as a corporation. partnership, or multi-member LLC, you’ll need to file around March 15 (unless the business operates on a fiscal year).

Also keep in mind that when you are operating a business, you will likely need to make estimated tax payments every quarter (on January 15, April 15, June 15, and September 15). Some businesses must also file monthly payroll taxes.

Here a snapshot of personal tax returns vs. business tax returns.

The Takeaway

Most business loans are not considered taxable income. However, when paying one off, you can likely deduct any interest you pay from your taxable income, thus lowering your overall tax liability.

There are always exceptions when it comes to taxes, so it can be a good idea to consult a tax professional if you’re unsure about whether any type of funding you’ve received could be counted as income and the validity of any business deduction.

If you’re seeking financing for your business, SoFi can help. On SoFi’s marketplace, you can shop top providers today to access the capital you need. Find a personalized business financing option today in minutes.

FAQ

Is loan repayment considered a business expense?

Payments on the principle of a business loan are not considered a business expense and are, therefore, not tax deductible. However, the interest you pay on a business loan typically is considered a deductible business expense.

Can you deduct interest you paid on a business loan?

Yes, the interest you pay on a business loan is typically tax deductible.

Is an SBA loan considered income?

Just like the proceeds of any business loan, the money you receive through a Small Business Administration (SBA) loan is not viewed as taxable income, since you will be paying that money back. The interest you pay on an SBA loan (or any type of small business loan), however, can usually be deducted as a business expense.

Photo credit: iStock/Drazen Zigic

SoFi's marketplace is owned and operated by SoFi Lending Corp. See SoFi Lending Corp. licensing information below. Advertising Disclosures: SoFi receives compensation in the event you obtain a loan through SoFi’s marketplace. This affects whether a product or service is featured on this site and could affect the order of presentation. SoFi does not include all products and services in the market. All rates, terms, and conditions vary by provider.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

SOSB-Q224-1863084-V1

You can obtain financing even if you run a small business all by yourself.
Every business, from the largest corporation down to a one-person operation, needs capital to operate and grow. That capital can help a business pay its expenses, purchase real estate, or take advantage of opportunities for expansion.
When you’re running a small business as a sole proprietor, you may not have access to the same kind of cash that a larger business may, so you might consider financing as a way to get that capital.
There are different types of small business loans available for sole proprietors that may be able to help you get access to cash when you need it.

What Are Sole Proprietorships?

Just in case you’re unfamiliar with the term “sole proprietor,” let’s clarify what that is first.

A business can have one of several business structures:

•  Sole proprietorship

•  Partnership

•  Corporation

•  Limited Liability Company (LLC)

•  Nonprofit

The last three require special paperwork and a filing fee to set up. So if you haven’t done any of that and you don’t have a partner, your business is, by default, a sole proprietorship.

One of the primary features of a sole proprietorship is that there’s no separation between the business and you as the owner. That means that you can take all the profits.

But it also means that you are personally responsible for your business’s debts. In other words, if your business were ever to be sued and it didn’t have enough money to pay the debts, your personal assets could be used to cover those expenses.

Nonetheless, if you’re looking for simplicity, a sole proprietorship provides it. There aren’t any complicated processes to deal with, and you retain full control of your company.

Recommended: Unemployment for Small Business Owners

Pros and Cons of Sole Proprietorships

Before we look at small business loans for sole proprietors, let’s briefly explore some benefits and drawbacks to running your business as a sole proprietorship.

Now let’s look at loans typically available for sole proprietors so you can decide which is right for you.

Financing Options

Loans can infuse your business with capital but you need to present a strong case for yourself to qualify.

SBA Loans

Small Business Administration loans for sole proprietors are offered by a variety of lending institutions. The most popular is the 7(a) program, which can be secured for up to $5 million, depending on your qualifications. Interest rates vary depending on the lender, and terms range between five and 25 years. Typically, these loans can be more difficult than some other options to qualify for.

Bank Loans

Banks and credit unions offer sole proprietor loans, though they may be harder to qualify for than SBA loans, especially if your credit score is under 700. Rates and terms vary by lender.

Lines of Credit

Another funding option for sole proprietors is a line of credit. While loans provide you with a lump sum of capital all at once, a line of credit gives you access to a certain amount decided by the lender. Borrow a little or borrow it all, and then you only pay back what you’ve borrowed. You pay interest only on the amount you’ve drawn out. Rates and terms vary by lender. APRs on lines of credit vary, and there can also be fees attached to them.

Business Loan Alternatives

Loans and lines of credit like those listed above aren’t your only options for getting capital as a sole proprietor. Here are a few business loan alternatives to consider.

Business Credit Cards

Though they aren’t loans, business credit cards can allow you to make purchases for your company when you need to, even if you don’t have cash on hand. If you don’t have good enough credit for a business loan, having a credit card and paying your bill on time is one way to help you build a positive credit record for your business. Further down the road, you might be able to qualify for other financing options.

Crowdfunding

Another option for getting access to capital, with the added benefit that you might not need to pay the money back, is small business crowdfunding. A company can set up a campaign on one of several crowdfunding sites to raise money for a new product line, for example. Anyone can donate to your project, and you don’t have to pay that money back. You may, however, be required to offer perks, like products or t-shirts with your logo on them.

How to Qualify and Apply for a Business Loan for a Sole Proprietor

If you’re considering applying for a business loan for a sole proprietor, start by understanding
what each particular lender you’re interested in requires for the application process and make sure you qualify first.

Some lenders list the specific credit scores you need to have to qualify, as well as how long you need to have been in business. Others do not. But with a little research online, you may find other websites that tell you what a particular bank requires, even if the bank’s website doesn’t.

Before applying, get your business documents and information in order so you can streamline the process. Some banks may require financial documents like profit and loss statements, so getting a sense of what a bank needs and having those documents ready to go will make the application go faster.

Working with Lenders

You’re not guaranteed to be approved for a loan from any one lender, nor get the best rate, so it’s a good idea to find several lenders you’d like to apply with. Taking these steps before you apply may help improve your chance of finding a loan that you like.

Many lenders offer the opportunity to prequalify, meaning that you can provide a few details about yourself and your business to see if you’d be eligible for financing. This should not impact your credit, and it can help you identify which lender offers the best terms.

Finally, before applying, check your credit scores and see where they stand. It’s very helpful to have a business credit score established. If not, your personal credit score can be referred to.

The Takeaway

Taking out a small business loan for a sole proprietor can give you access to the capital your business needs to thrive. There are a variety of funding types available, and with so many options, it’s just a matter of choosing the one that best fits your business’ needs.

If you’re seeking financing for your business, SoFi can help. On SoFi’s marketplace, you can shop top providers today to access the capital you need. Find a personalized business financing option today in minutes.

FAQ

Can sole proprietors get SBA loans?

Yes. SBA loans are open to all types of business structures, including sole proprietorships.

What credit score do you need to get a business loan as a sole proprietor?

The credit score requirements will vary from one lender to another. As an example, an SBA loan for a sole proprietor might require a credit score of at least 640.

What are the benefits of being a sole proprietor?

There are many benefits to running your business as a sole proprietor. These include simplified taxes, retaining control of decision-making, and no complicated paperwork or fees to file.

Photo credit: iStock/laddawan punna

SoFi's marketplace is owned and operated by SoFi Lending Corp. See SoFi Lending Corp. licensing information below. Advertising Disclosures: SoFi receives compensation in the event you obtain a loan through SoFi’s marketplace. This affects whether a product or service is featured on this site and could affect the order of presentation. SoFi does not include all products and services in the market. All rates, terms, and conditions vary by provider.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

SOSB-Q224-1860627-V1

Businesses that need cash quickly but don’t have strong credit will sometimes turn to an alternative type of funding called a merchant cash advance (MCA). With an MCA, a financing company gives you an upfront sum of cash that you repay using a percentage of your debit and credit card sales, plus a fee.

An MCA can be helpful for covering cash flow shortages or short-term expenses, but if you end up taking out more than one merchant cash advance, you can end up paying different (and potentially high) interest rates and fees for each. Plus, you have to deal with different payment schedules for each MCA.

A merchant cash advance consolidation is an option that lets you roll up all of those advance payments into one. Ideally, an MCA consolidation has the potential to reduce what you’re paying in interest and fees. Here’s what you need to know about this type of consolidation loan.

What Is a Merchant Cash Advance?

Not every business qualifies for a traditional bank loan. Perhaps it hasn’t been in business long enough to be eligible, or maybe it doesn’t meet the credit requirements for a small business loan. That’s when a merchant cash advance may be useful.

An MCA is not a loan, but rather an advance on future sales. To determine eligibility, MCA providers may not rely heavily on criteria like time in business and/or credit scores, but instead focus on revenues. That can make it easier to get than other types of financing.

When you get an MCA, you receive a lump sum payment. Typically, MCAs express the interest they charge as a factor rate (often ranging from 1.1 to 1.5) rather than as a percentage. The factor rate does not include any additional fees the merchant cash advance company may charge you, such as administrative or underwriting fees.

The repayment on an MCA works differently than other types of business loans. Typically, the MCA provider automatically deducts a daily (or weekly) percentage of your debit and credit card sales until the advance is repaid in full. Repayment periods can range anywhere from three to 18 months. Generally, the more you make in credit card sales, the faster you’ll repay the advance.

The downside is that, when it comes to conventional vs. Small Business Administration (SBA) loans vs. merchant cash advances, MCAs tend to have much higher fees and interest rates than the other two, making them a costly financing option.

Indeed, when you convert factor rates plus fees into an annual percentage rate (APR), the APRs on merchant cash advances can run as high as 350%, depending on the lender, size of the advance, fees, business revenue, and how long it takes to repay the advance.

What Is Merchant Cash Advance Consolidation?

A small business owner might take out a merchant cash advance to see their way through a slow period, then, when they struggle with repayments, apply for another MCA to help repay the first. This is a process known as loan stacking. The company could then end up with multiple repayment schedules and paying different factor rates and different amounts for each advance.

A merchant cash advance consolidation rolls multiple MCAs into. a single new loan. The consolidation loan typically pays off your existing MCAs and allows you to make one payment, often monthly, to the consolidation lender. Ideally, the consolidation loan will have a lower interest rate than the average your business was paying on the multiple advances.

Recommended: Loans for Sole Proprietors

When to Consider Merchant Cash Advance Consolidation

If your business has taken out multiple merchant cash advances, you may be able to save money with a merchant cash advance consolidation loan. You’ll also be able to simplify repayment by having a single automatic debit rather than multiple payments taking place at different times and for different amounts. This can make it easier to predict and budget for repayments.

But there are a few things to consider before you jump into MCA consolidation. One is whether or not your existing MCA lenders will charge you a prepayment penalty fee if you pay off your advances early. You’ll also want to find out if there are any upfront fees you have to pay for the new consolidation loan, since this can eat into your savings.

If, after running all the numbers, it looks like you can save money and streamline repayment, it may be a good time to consider a merchant cash advance consolidation.

Recommended: Merchant Cash Advance Regulations

What to Consider With Merchant Cash Advance Consolidation

Before applying for a consolidation loan, you’ll want to look at what you’re currently paying in interest and what you’d qualify for with a new loan. Also consider any fees for the new loan and any payoff penalties you’ll owe your current lenders. If, once you crunch the numbers, your total debt hardly goes down, there’s probably no sense in taking on a new consolidation loan.

When deciding whether it makes sense to do an MCA consolidation, you also want to look at the repayment period and what your payments with the new loan will be. A shorter repayment period can mean larger payments that you might not be able to afford. And, while a longer repayment period can mean smaller payments, it will likely mean paying more in total interest.

Examining the options can help you find the best path forward for your business.

Refinancing vs Consolidation

If you’ve heard of business loan refinancing, you may think it’s the same as merchant cash advance consolidation, but these aren’t exactly the same.

It’s true that both can potentially lower your interest rate and/or lengthen your payment term. However, when you refinance, you’re replacing one MCA with a new one or with a small business term loan. When you opt for an MCA consolidation, you’re rolling multiple MCAs into a new MCA or other type of business loan.

Recommended: Refinancing Your Student Loans While Starting a Business

Types of Consolidation Loans

There are a few types of cash advances and loans you can use for consolidation, depending on what you qualify for.

Lenders may have different approaches to help you with consolidating your loans. Some will buy out the loan and pay it off directly, while others will lend you the money, after which it’s your responsibility to pay off your existing MCAs.

Merchant Cash Advance

If you’ve taken out multiple MCAs, it’s likely because your business doesn’t have great credit and may not qualify for other types of loans. If that’s the case, you might consider a new, larger merchant cash advance to consolidate your existing MCAs, ideally with more favorable terms.

Be aware that you will likely have a short repayment period, perhaps between a few months and three years.

Online Lenders

Another consolidation option if you don’t have excellent credit is taking out a consolidation loan with an online lender. Interest rates may be lower than with a merchant cash advance, and repayment terms may be longer.

SBA Loans

SBA loans like the 7(a) program can be used to consolidate business debt that is approved by your lender, if you qualify. Repayment terms can be up to 25 years, and rates on SBA loans are among the lowest of any financing option for businesses.

Traditional Bank Loans

If you’ve been able to build your business or personal credit since taking out the MCAs, you may qualify for a bank loan with lower rates and longer repayment terms. You can then use the proceeds of the loan to pay off your existing MCAs.

The Takeaway

If you feel like you’re drowning because you’re paying too much, too often, for multiple merchant cash advances, consolidating with a new advance or small business loan might be a solution that could help you lower your costs and roll everything up into one monthly payment.

If you’re seeking financing for your business, SoFi can help. On SoFi’s marketplace, you can shop top providers today to access the capital you need. Find a personalized business financing option today in minutes.

Photo credit: iStock/ipopba

SoFi's marketplace is owned and operated by SoFi Lending Corp. See SoFi Lending Corp. licensing information below. Advertising Disclosures: SoFi receives compensation in the event you obtain a loan through SoFi’s marketplace. This affects whether a product or service is featured on this site and could affect the order of presentation. SoFi does not include all products and services in the market. All rates, terms, and conditions vary by provider.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

SOSB-Q224-1860644-V1

Georgia has about 1.2 million small business owners statewide who can apply for small business grants. Submitting an application and competing for Georgia small business grants can help you grow your small or medium-sized enterprise in the Peach State.

Georgia’s economy has a gross domestic product of $661 billion as of 2023. That’s the ninth largest GDP in the United States out of the 50 states and the District of Columbia. Small businesses contribute to the nation’s economy.

If you’re a small business owner looking to fund or expand your enterprise, there are various sources of grants, which are funds that don’t need to be repaid, unlike loans. .Below, some of the top small business grants in Georgia that you can explore.

Grants for Small Businesses in Georgia

If you’re looking for small business grants in Georgia, here are some potential options to consider:

Go Global Georgia Grant Program

•  Program description: A Go Global Georgia grant from Georgia’s State Trade Expansion Program (STEP) can help you export your products and services from the Peach State to foreign markets.

•  Incentive: Get reimbursed up to 75% for eligible business expenses, including international marketing and trade show participation costs. (There’s a maximum award amount per company for each grant period.)

•  General requirements: Here are some of the general requirements for this grant:

◦  Be incorporated in the United States and operate in the state of Georgia

◦  Be a small business

◦  Be an active business in existence for at least 12 months

◦  Be in good standing with the federal government (have not been debarred)

◦  Be an export-ready Georgia company seeking to export goods or services of U.S. origin or that have at least 51% U.S. content

◦  Understand how exporting works and have sufficient resources to bear the costs associated with trade

•  How to apply: Applications for the Go Global Georgia export grant are available through the Georgia Department of Economic Development’s website. Applications must typically be received at least 30 business days prior to the requested export activity.

Atlanta’s Municipal Support for the Arts (MSA) Grant Program

•  Program description: The City of Atlanta offers grants to artists and arts organizations through its MSA program.

•  Incentive: Major arts organizations can receive up to $50,000 in matching grants supporting their community-based arts programs, and practicing artists can receive up to $4,000 supporting their work in the areas of dance, literary arts, media arts, visual arts, music, theater, or multidisciplinary genres.

•  General requirements: Here are some of the general requirements for this grant:

◦  Reside in the City of Atlanta or have Atlanta-based headquarters

◦  Operate as a 501(c)(3) nonprofit or independent artist

◦  Present an arts project within the City of Atlanta that’s open to the general public

◦  Nonprofit arts and community organizations must be incorporated in the state of Georgia and headquartered in Atlanta’s corporate city limits for three years prior to the application deadline

•  How to apply: You can apply for Atlanta MSA grants through the Mayor’s Office of Cultural Affairs website when the application period opens. Check to see the annual guidelines.

City of Clarkston Small Business Façade Matching Grant Program

•  Program description: Eligible commercial property owners in the City of Clarkston can receive partial reimbursement for enhancing the general aesthetics of a building exterior or façade.

•  Incentive: Receive up to $20K in reimbursements for making façade improvements to an eligible property in the City of Clarkston.

•  General requirements: Here are some of the general requirements for this grant:

◦  Own commercial property in one of the following City of Clarkston zoning districts:

◦  Clarkston Town Center (TC)

◦  Residential Commercial (RC)

◦  Neighborhood Commercial 1 (NC-1)

◦  Neighborhood Commercial 2 (NC-2)

◦  Propose a façade improvement project to your commercial property

◦  Adhere to all City of Clarkston/DeKalb County Fire Marshal codes and ordinances

•  How to apply: You can access the City of Clarkston small business façade grant application on the city’s website.

Perry Main Street BOOST Grant

•  Program description: BOOST is a small business grant program for eligible small business owners and entrepreneurs in the Downtown District of Perry, Georgia.

•  Incentive: Receive up to $1,000 per grant cycle that can help your small business grow.

•  General requirements: Here are some of the general requirements for this grant:

◦  Be a small business owner or entrepreneur within the Downtown District of Perry, Georgia

◦  Propose a small business project that seeks to use BOOST funds in one of the following eligible areas:

◦  Buying equipment, furniture, machinery, or fixtures for your business

◦  Making interior renovations

◦  Installing a security system

◦  Agree to place an “I’ve been BOOSTed” sign on your business for one month if awarded a grant

•  How to apply: You can access the BOOST Grant application on the City of Perry’s website.

Recommended: Hotel Loans Explained

City of Dallas Façade Grant Program

•  Program description: The City of Dallas Downtown Development Authority (DDDA) in the state of Georgia offers matching grants to eligible business owners who make façade improvements.

•  Incentive: Receive up to $5,000 in reimbursements for making façade improvements to an eligible property in the Central Business District of Dallas, Georgia.

•  General requirements: Here are some of the general requirements for this grant:

◦  Be a business or commercial property owner in the Central Business District of Dallas, Georgia

◦  Propose a façade improvement project to an eligible commercial or mixed-use property in the Central Business District

◦  Comply with all government rules, regulations, and laws, including local ordinances, building codes, and Historic Preservation Commission design guidelines if applicable

◦  Priority will be given to buildings that are historic, architecturally significant, visually prominent, or unsightly and in need of repair

•  How to apply: You can access the DDDA Façade Grant Program application on the city’s website.

Do You Have to Pay Back a Small Business Grant?

A small business grant typically comes with terms and conditions, and you may be responsible for paying back the grant if you violate those terms. In general, small and midsized business owners are not required to pay back an SMB grant absent any violations.

You typically have to sign a funding agreement to accept a small business grant. As mentioned above, the grant may come with certain conditions. Using the grant for an illegitimate purpose may violate the agreement and require business owners to pay back the grant.

Small business grants may require you to spend the money by a certain date. You may also have to provide proof of payment and a written statement detailing how you’ve spent the grant.

Recommended: Opening a Business Bank Account: How Business Bank Accounts Work

Who Is Eligible for Small Business Grants in Georgia?

Local business owners or operators of an enterprise with fewer than 500 employees may be eligible for small business grants in Georgia.

The U.S. Small Business Administration’s Office of Advocacy generally defines a small business as an independent business having fewer than 500 employees. Georgia, however, defines a small business as having 300 or fewer employees or less than $30 million in gross receipts per year. You can research which definition a particular grant uses. A small business, including individuals with freelancing business ideas, may be eligible for small business grants.

What Industries Does Georgia Support With Grants?

Georgia offers a variety of grants supporting the following industries:

•  Manufacturing

•  Performing arts

•  Retail trade (store and nonstore retailers)

Georgia Resources for SMB Owners Looking for Funding

Here are some resources for small and medium-sized businesses looking for funding in the Peach State:

University of Georgia Small Business Development Center (SBDC)

The University of Georgia’s SBDC is a statewide program that can provide Georgia’s small business owners with the following services:

•  Business training webinars and workshops

•  Commercialization assistance for small and mid-sized companies

•  Professional business consulting at no cost

SBA District Office in Georgia

The U.S. Small Business Administration (SBA) is a federal agency that provides resources and support to small business owners. The SBA District Office in Atlanta serves all 159 counties in Georgia.

Recommended: Small Business Grants in Pennsylvania

Alternative Funding Sources for Small Businesses in Georgia

Here are some alternative funding sources for small businesses in Georgia:

Georgia State Small Business Credit Initiative (SSBCI)

Georgia’s SSBCI is a federally funded program for small business owners in the Peach State. Federal law — the American Rescue Plan Act of 2021 — allocates nearly $200 million to Georgia’s State Small Business Credit Initiative program.

Here’s how Georgia plans to use the SSBCI funding:

•  Georgia Loan Participation Program — $70 million. This program uses SSBCI funds alongside private funds to support loans to small business borrowers.

•  Georgia CDFI Program — $60 million. Federally designated Community Development Financial Institutions (CDFIs) participating in the Georgia CDFI program can help minority-owned small businesses and other socially and economically disadvantaged communities in the Peach State access SSBCI funds.

•  Georgia Venture Capital Program — $30 million. This program will help eligible startups access venture capital.

•  Georgia Equity Direct Program — $20 million. This is another program that can help eligible Georgia startups access venture capital.

•  Georgia Small Business Credit Guaranty (SBCG) Program — $19.6 million. This program provides lenders with a 50% credit guaranty on eligible small business loans of up to $1 million.

Georgia Microloan Lenders

Community-based nonprofits may offer microloans of up to $50,000 to small business owners in Georgia, including microloans for women-owned small businesses. In general, microloans can range from $500 to $50K and may be available to startups.

Georgia SMB Loans from Private Lenders

Banks, credit unions, and private lenders may offer different types of small business loans to Georgia business owners.

Here are some of the funding products you may consider depending on your needs:

•  Commercial real estate loans

•  Equipment financing

•  Small business loans for startups

•  Working capital lines of credit

The Takeaway

There are many opportunities for small businesses in Georgia, whether it’s grants from state or local governments or grants from the private sector.

If you’re seeking financing for your business, SoFi can help. On SoFi’s marketplace, you can shop top providers today to access the capital you need. Find a personalized business financing option today in minutes.

FAQ

How do you get a small business grant in Georgia?

You can apply for Georgia small business grants, but there’s no guarantee you’ll get approved for one. You may have to submit a grant application as a qualified small business owner to be considered for a small business grant in Georgia.

How hard is it to get a business loan in Georgia?

You may have difficulty getting a small business loan in Georgia if you have bad credit or insufficient business experience. Unlike the case with grants, you generally have to pay back business loans with interest.

What is the easiest SBA loan to get approved for?

There’s no guarantee you’ll get approved for any SBA loan, but SBA microloans may be one of the easier ones to get if you’re a new business owner. Startups may be eligible for SBA microloans of up to $50K. If you’re looking for a streamlined application process, SBA Express working capital loans are an option you may consider.

Photo credit: iStock/Boogich

SoFi's marketplace is owned and operated by SoFi Lending Corp. See SoFi Lending Corp. licensing information below. Advertising Disclosures: SoFi receives compensation in the event you obtain a loan through SoFi’s marketplace. This affects whether a product or service is featured on this site and could affect the order of presentation. SoFi does not include all products and services in the market. All rates, terms, and conditions vary by provider.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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Net operating income (NOI) and earnings before interest, tax, depreciation, and amortization (EBITDA) are two similar metrics used to measure a company’s profitability based on its core business operations. However, different industries use them. NOI is generally used in real estate to evaluate income-producing properties, whereas EBITDA is most often used to measure how efficiently a company is operating and how it compares to competitors.

Here’s a closer look at NOI vs. EBITDA, how each one is calculated, their similarities and differences, and why they are important.

What Is Net Operating Income?

Net operating income, or NOI, is a measurement used to determine the profitability of an income-producing property. NOI determines the revenue of a property by subtracting gross operating expenses from gross income. While NOI is most frequently used in the real estate industry, it can be used by any company that earns income from a property.

With NOI, a property’s gross income is everything it earns minus any losses due to vacancies.

As a rule of thumb, an expense is considered an operating expense if not spending money on that cost would jeopardize the asset’s ability to continue producing income. Operating expenses commonly include property taxes, vendor and supplier costs, maintenance and repair, insurance, utilities, licenses, supplies, and overhead costs, such as expenses for accounting, attorneys and advertising.

Since income taxes, loan interest and principal payments, capital expenditures (money spent on improvements or repairs), and amortization and depreciation (the gradual write-off of long-term assets) do not impact the potential of a real estate investment to make money, they are not included in NOI.

A lender may look at a company’s NOI if they are applying for a small business loan, such as a commercial real estate loan.

How to Calculate Net Operating Income

NOI measures a property’s ability to generate a profit from its operations. The NOI formula is:

NOI = Gross Operating Income – Operating Expenses

What Is EBITDA?

Earnings before interest, taxes, depreciation, and amortization (EBITDA) is used to calculate the earnings that a business has generated from its core operations.

To calculate a company’s annual earnings, EBITDA factors in the cost of goods sold, general and administrative expenses, and other operating expenses. However, it doesn’t subtract costs that are not directly related to the company’s operations, namely interest paid on debt, amortization and depreciation expenses, and income taxes on business revenue. The reason is that these costs are outside of management’s operational control.

By adding these values back to net income (which is gross business income minus all business expenses), many analysts believe that EBITA can be a better measure of company performance because it shows earnings before the influence of accounting and financial deductions. EBITDA can also be useful for comparing firms with different sizes, structures, taxes, and depreciation.

Your company’s EBITDA may be calculated by a potential investor or by a creditor when you’re applying for a business loan because it provides a snapshot into how well your company will be able to pay its bills and maintain or increase net income.

How to Calculate EBITDA

It’s easy to calculate EBITDA. Here are the two most commonly used ways.

Option 1:
Start with net income (the bottom line of the income statement), and then add back the entries for taxes, interest, depreciation, and amortization.

Net income + Taxes Owed + Interest + Depreciation + Amortization = EBITDA

Option 2:
Start with operating income (also referred to as operating profit or EBIT – earnings before interest and taxes). This is the amount of revenue left after deducting the direct and indirect operating costs from sales revenue. If you add depreciation and amortization to operating income you get EBITDA.

Operating Income + Depreciation + Amortization = EBITDA

Recommended: Business Cash Management, Explained

NOI vs EBITDA

NOI and EBITDA have some similarities, but also a couple of key differences. Here’s how the two formulas compare.

Similarities

Both NOI and EBITDA measure the profitability of a business or property without including income taxes, the cost of loans, amortization, or depreciation as expenses. NOI is essentially EBITDA within a real estate context. By stripping away incidentals, both NOI and EBITDA level the playing field, which makes them useful for comparing different properties and businesses.

Banks will often use NOI or EBITDA (depending on a borrower’s industry) before giving the green light on different types of business loans. These metrics help them determine whether or not the business will have the cash flow to pay back the loan.

Recommended: NOPAT vs EBITDA

Differences

NOI is primarily used to evaluate the profitability of an investment in a commercial or residential real estate property. EBITDA, on the other hand, is primarily used to evaluate the profitability of a company. As a result, NOI takes into account lost revenues from vacancies, whereas EBITDA does not.

Recommended: What You Should Know About Short-Term Business Loans

Example of EBITDA vs Net Operating Income

Let’s look at how NOI and EBITDA compare when they are applied to a business.

Let’s say you’re considering purchasing a multi-tenant apartment building. You know the property already brings in gross revenues of $1.5 million. Operating expenses are $500,000, and other expenses include:

•  Lost revenues from vacancies: $50,000

•  Interest: $4,000

•  Tax: $100,000

•  Depreciation: $50,000

•  Amortization: $25,000

Here’s how to calculate the property’s NOI:

NOI = Gross Revenues ($1.5 million – $50,000 in vacancies) – Operating Expenses ($500,000)

NOI = $950,000

While EBITDA is not typically used to calculate profits of real estate, let’s look at what the building’s EBITDA would be for the sake of comparison.

To calculate EBITDA, you first need to figure out net income, which is gross revenues minus operating expenses:

$1.5 million (gross revenue) – $679,000 (operating expenses) = $821,000 (net income)

EBITDA = Net Income ($821,000) + Taxes Owed ($100,000) + Interest ($4,000) + Depreciation ($50,000) + Amortization ($25,000)

EBITDA = $1,000,000

The difference between the two – $50,000 – represents the lost income to vacancies, which is not factored into EBITDA.

Recommended: Net Present Value: How to Calculate NPV

Pros and Cons of Using NOI

While NOI can give potential investors and lenders a good indication of how profitable a property will be, it also has some drawbacks. Here’s a look at the pros and cons of using NOI.

Recommended: Typical Interest Rates for Business Loans

The Takeaway

Both NOI and EBITDA calculate a company’s profitability by subtracting operating expenses from revenues. In addition, both metrics exclude income taxes, debt expenses, depreciation, and amortization, since these expenses are not related to the company’s core operations.

The key difference between NOI and EBITDA is that NOI is used for real estate and EBITDA is used for general businesses.
If you’re interested in seeking out a small business loan, a lender will likely look at your NOI or EBITDA (depending on your company’s industry), along with other key financial metrics, to see whether you have enough positive cash flow to comfortably make payments on the loan.

If you’re seeking financing for your business, SoFi can help. On SoFi’s marketplace, you can shop top providers today to access the capital you need. Find a personalized business financing option today in minutes.

FAQ

Does net operating income mean the same thing as EBITDA?

Net operating income, or NOI, and EBITDA (earnings before interest, tax, depreciation, and amortization) are similar ways to calculate a business’s profitability. However, NOI is used for an income-generating property and EBITDA is used for a business.

Should EBITDA OR NOI be higher?

If you used EBITDA (earnings before interest, tax, depreciation, and amortization) and NOI (net operating income) to evaluate the same income-producing property, EBITDA would be higher because it does not account for lost income due to vacancies.

Can you have a negative EBITDA?

Yes, if a company has poor cash flow, its EBITDA (earnings before interest, tax, depreciation, and amortization) can be negative.

Photo credit: iStock/LumiNola

SoFi's marketplace is owned and operated by SoFi Lending Corp. See SoFi Lending Corp. licensing information below. Advertising Disclosures: SoFi receives compensation in the event you obtain a loan through SoFi’s marketplace. This affects whether a product or service is featured on this site and could affect the order of presentation. SoFi does not include all products and services in the market. All rates, terms, and conditions vary by provider.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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