SoFi

These days, starting an e-commerce business is relatively simple. Growing that business into a successful online store with solid revenues, however, can be challenging. To effectively scale an e-commerce company, you generally need to take a proactive, multi-pronged approach. You need to not only find customers and bring them to your site but also encourage them to make a purchase and come back for more visits.

There are some simple, effective actions you can take to grow your company, especially if it’s still in the early stages.

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10 Tips for Growing an E-commerce Business

Below are 10 proven e-commerce business growth strategies to try.

1. Build Your Email List

Email marketing can be an effective tool for an e-commerce business. To build your email list, consider including an opt-in email capture form on your site, as well as during checkout. You might incentivize sign-ups by offering a bonus, such as a discount code or free shipping, in return.

The key to successful email marketing is to deliver quality content. If it looks like spam to you, it’s going to look like spam to everyone else. You’ll want to make sure that every email is unique and that your customers feel like they are getting an opportunity every time they open up one of your emails. Try to personalize the content and offer a mix of articles, videos, tips, and special offers.

2. Encourage Repeat Business

While bringing new customers to your site is essential to your company’s success, it’s equally important to retain the customers you already have. Consider offering incentives not just to new customers but also to returning ones. You might also want to start a loyalty program to get your customers excited about visiting your site regularly.

Another way to encourage repeat business is to send personalized emails to prior customers that include recommendations of products that go well with the ones they’ve already purchased.

3. Make Your Site Mobile Friendly

The web is increasingly being accessed by mobile devices rather than computers and laptops. Designing your website to be mobile friendly ensures that your pages perform well on all devices. If you used Squarespace or WordPress to make your website, chances are your ecommerce site is already mobile friendly. However, it can be a good idea to check. You can go to Google’s Mobile-Friendly page to test how easily a visitor can use your page on a mobile device.

4. Run Limited-Time Promotions

How many times have you filled up a shopping cart on an ecommerce site and then abandoned it completely? When you did commit to a sale, was it because of a promotion that was ending that day? Limited-time promotions can be a great way to encourage shoppers to hit the “place your order” button.

The best promotion idea will depend on the type of merchandise you sell, but common ones include: free shipping, free give with purchase, a discount (like 20% off), and buy one get one free (BOGO).

5. Offer Excellent Customer Service

Customers who have a poor customer service experience will likely take their business to a competitor. Those who have a positive shopping experience, on the other hand, will probably want to shop with you again. It’s not hard to give good service and the financial rewards can be well worth the added time and effort. Consider offering customer service on multiple channels — by phone, live chat on your website, SMS, email, and via social media.

6. Master E-commerce SEO

What searches do you want your site to show up on? How do you want new customers to find you? Understanding and taking advantage of search engine optimization (SEO) can help your site beat out the competition on Google search results.

If you’re new to the world of SEO, sites like Semrush offer guides that can help you get more organic traffic to your site. If you’d rather outsource the job, you may be able to find an affordable SEO pro on a freelance website like Fiverr or Upwork.

7. Encourage Customers to Leave Reviews

Positive reviews are known to increase conversions. Consider asking customers to review your business or service right after checkout, perhaps with a clickable star-rating window.

To encourage product reviews, follow up with customers via email and ask them to submit a review of their purchase. You might even offer an incentive, such as a discount for a future purchase, in return for leaving an honest review. You might also search sites like TrustPilot for reviews of your products and include them in your review listing.

8. Market Campaigns Toward Lost Customers

Consider using social media to market ads to customers that have visited your site but didn’t make a purchase. Or, if you were able to get their email when they visited your ecommerce company, you can email them to remind them they still have items in their cart.

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9. Offer International Shipping

If you limit your reach to just U.S. customers, you’re limiting your company’s sales potential. Consider offering free shipping to anywhere in the world — you may be surprised where your sales start coming from. If it’s not feasible for you to offer free global shipping, consider giving shoppers information about any extra costs involved in international shipping upfront, so they know what to expect when they check out.

10. Partner With Influencers

You may be able to significantly expand your ecommerce business’s reach by partnering with influencers who have thousands of followers (and possibly more). You might want to reach out to influencers who focus on your industry and help them create content that can lead to sales. You’ll need to offer them payment (such as a fee or commission) for their work and effort, but if they have a large audience, it may be well worth their price.

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Which Strategies Are Right for Your E-commerce Business?

You may want to start with the skills and tools you already have, and build from there. Consider which growth strategies you and your team can implement on your own. Once you’ve reached your limits, you may want to bring in outside contractors who have the expertise you lack. The return on your investment may more than cover any initial costs.

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Are There Any Downsides to Growing Your E-commerce Business?

While e-commerce growth is good, rapid growth isn’t always good. If you grow too quickly, you may not be able to maintain quality control or even fulfill large purchase orders. This can lead to disappointed customers, negative reviews, and, potentially, the downward spiral of your business. Rapid growth could also push your employees to exhaustion, reduce their morale, and cause people to quit.

The key to healthy e-commerce growth is to make sure you don’t damage what you already have as you expand. Steady, predictable growth can often be healthier than an overnight explosion.

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Funding E-commerce Business Growth

There are a number of different ways to get financing for e-commerce business growth, from finding investors to exploring loans. Here are some you may want to consider.

Business Loans

There are many types of small business loans. Banks typically offer the lowest rates and best terms but tend to have strict qualification criteria. If your ecommerce business is less than two years old, you may have better luck getting a loan through an online lender. Also known as alternative lenders, these companies tend to have more flexible qualification criteria and are faster to fund than banks. However, they typically charge higher rates.

Out of Pocket

Funding e-commerce business growth out of pocket may not be the fastest route to expansion. However, it can be beneficial because it means you won’t have extensive loans and monthly payments that bog you down, especially if you run into bumps along the way. Once income becomes consistent and predictable, though, you may want to venture away from bootstrapping.

Cash Advances

If your e-commerce business has high credit card sales volume and you need funding quickly, you might look into a merchant cash advance. With this type of financing, you receive funds as a lump sum upfront from an MCA provider and repay the advance from future sales. Typically, the lender will automatically deduct a portion of your credit card sales, usually each business day. MCAs are generally easy to qualify for but costs typically run significantly higher than traditional small business loans.

Small Business Grants

There are a variety of government, nonprofit, and private entities that offer small business grants. You may be able to qualify for a grant if your business meets certain requirements (such as being a woman-, minority-, or veteran-owned business). Unlike loans, grants do not need to be paid back. However, competition for this type of funding tends to be intense.

Recommended: 30 Small Business Grants and Databases for Women

Equipment Financing

There are also loans specifically for buying equipment, such as computers you might use in your e-commerce business. With equipment financing, the equipment itself acts as collateral for the loan, which keeps the interest rate low and your other assets (either business or personal) safe. You would typically get a quote for the equipment you’d like to buy, and a lender would then front you all or a large portion of the cost.

Business Credit Cards

If you need a way to cover dips in cash flow, you might consider a business credit card. If you can qualify for a business card with a 0% introductory annual percentage rate (APR), you can spend for a predetermined period without interest. If you pay off your balance before the end of the introductory period (which may be a year-plus), you don’t have to pay any interest at all. A business credit card can also help you build business credit, which can allow you to access loans with low rates and attractive terms in the future.

Recommended: Can You Get a Business Credit Card Before You Open Your Business?

The Takeaway

There’s no one way to grow an e-commerce company, but proven strategies include email marketing, making sure your site is SEO- and mobile-friendly, running time-sensitive promotions, and giving excellent customer service. Once you’re in a rhythm and are seeing the results of your labor, you may want to leverage a small business loan to help your business reach the next level in its growth journey.

If you’re seeking financing for your business, SoFi is here to support you. On SoFi’s marketplace, you can shop and compare financing options for your business in minutes.

FAQ

What are some tips for growing an e-commerce business?

To grow your e-commerce business:

•  Build an email list

•  Use SEO

•  Encourage repeat business

•  Provide excellent customer service

•  Sell to international markets

•  Partner with influencers

•  Make sure your site is mobile-friendly

•  Offer time-sensitive promotions

How can you receive funding for an e-commerce business?

E-commerce funding options include:

•  Bank small business loans

•  Online small business loans

•  Business lines of credit

•  Business credit cards

•  Merchant cash advances

•  Small business grants

How do you scale a small e-commerce business?

Some effective ways to scale a small e-commerce business include optimizing your site for SEO, creating a marketing campaign that includes social media and email marketing, and developing an online ads strategy.

Photo credit: iStock/JLco – Julia Amaral

SoFi's marketplace is owned and operated by SoFi Lending Corp.
Advertising Disclosures: The preliminary options presented on this site are from lenders and providers that pay SoFi compensation for marketing their products and services. This affects whether a product or service is presented on this site. SoFi does not include all products and services in the market. All rates, terms, and conditions vary by provider. See SoFi Lending Corp. licensing information below.

This content is provided for informational and educational purposes only and should not be construed as financial advice.

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.

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.

SOSMB-Q424-079

Small business accountants can do more than help you file your business taxes. They can also set up an accounting system, help you prepare financial statements, audit your books, and create financial goals for your business. If you think your business could benefit from the help of a certified public account (CPA), read on.

Here’s a closer look at what they do, how they can help your business both in the short- and long-term, and how to find the right finance pro for your company’s needs and budget.

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Does Your Business Need an Accountant?

To determine if your company needs an accountant, it helps to understand what CPAs do and how they may be able to help your small business.

What Accountants Do

A certified public accountant can help with many aspects of small business accounting, including:

•  Preparing personal and business tax returns and filing them on your behalf

•  Preparing the documents needed to submit an application for a small business loan or grant

•  Helping your business manage its day-to-day finances and cash flow

•  Notifying you of clients and customers who have a habit of paying late

•  Warning you about increasing costs that may affect your business, as well as helping you find affordable alternatives

•  Analyzing daily, weekly, monthly and seasonal cash flow patterns in your business

•  Illustrating key financial ratios for your small business

•  Recommending areas to consider expanding or shrinking your business

•  Helping you establish a weekly and monthly budget for your business

•  Taking care of your company’s payroll

•  Helping you prepare financial statements for potential investors or lenders

If you need something more specific, contact a CPA and ask if they can do it. You may find they can help you with your unique issue, whether it’s choosing accrual vs. cash accounting or how to expand your business into another state.

When You Might Need a CPA

Here are some common business scenarios in which you may need a CPA to help you out.

•  You need to change your business classification. As a business owner, there are a number of different ways you can structure your business. A CPA can help you choose the best set-up so you’re not overpaying come tax time. Even if you decide you don’t want to make a change, an accountant may be able to help you make the most of your current structure.

•  Your business is growing. When a company grows, its finances typically become more complex. As more money comes in and goes out, and you begin to work with more vendors and hire more employees, cash flow can be difficult to keep track of. A CPA can help you with this by staying on top of payments, payroll, and everyday expenses. Small business owners often try to save money by not delegating tasks that a CPA can do, but the truth is that CPAs very often save businesses money, leaving the business owner more time to do what they do best — coming up with great ideas that can grow the business.

•  You don’t understand taxes, deductions, and tax credits. You may be a wiz at developing products and acquiring new customers, but if taxes are like another language to you, then you likely need a CPA. It’s not that it’s beyond your ability to learn, but the more time you spend working on it, the more time you’re taking away from your business. Moreover, each year many business owners make mistakes, such as overpaying on their taxes.

•  You need help preparing financial documents. Whether you are selling your business or looking to get small business financing, a professionally prepared financial report by a CPA can make the process go more smoothly. When going through the application process for a loan, a CPA can directly answer any lender’s questions about your financials.

•  You’re being audited by the IRS. Small business audits are not uncommon for businesses with complicated tax returns. Low annual revenue and a large amount of expenses can also be triggers for an IRS audit. A CPA can help the audit process by providing documents and backup information an auditor requests, allowing you to focus your attention on running your business.

4 Steps to Finding a CPA for Your Small Business

Wondering how to find a good accountant for your small business? These four steps can help you hone in the best pro for your needs.

1.   Ask fellow professionals in your circle. A good place to begin your search for an accountant is by asking your peers, such colleagues and other business owners in the community, for recommendations. People in your network are likely to have a good handle on what you need and may be able to offer feedback on CPAs they’ve worked with.

2.   Tap social media channels. You might also join local business communities on Facebook or LinkedIn (if you haven’t already), then post that you’re looking for a good small business accountant. It’s not necessary for your CPA to be local, but it could be beneficial if they are, especially if they have connections with local banks.

3.   Check their credentials. Both accountants and CPAs perform similar functions, but a CPA has met state licensing requirements in order to earn the CPA designation. A CPA is also able to represent you in front of the IRS (not all tax preparers can do so). You can check an accountant’s credentials on the IRS’s Directory of Federal Tax Return Preparers.

4.   Conduct an interview. It can be a good idea to schedule a meeting with a CPA to discuss why you are seeking their services (making sure you ask the questions below). Not all accountants specialize in the same things, so it’s very possible they may direct you to another CPA who is better suited for your needs, or you may feel a need to continue your search.

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Evaluating an Accountant

While interviewing a potential CPA, you’ll want to ask a wide array of questions and get to know the person you may work with. If you have a good rapport with one another, your interview should become less of a test and more of a discussion of the ways your business can grow and expand.

Questions you may want to ask include:

•  What is the cost? Do they charge by the hour, or do they have a flat fee?

•  Do they have a team? Some CPAs work by themselves, while others have partners or staff. If they have a team, you’ll want to know their qualifications.

•  What’s their availability and typical turnaround time? How quickly can they get back to you if questions come up? How much of their time will you get?

•  How long have they worked as a CPA? Are you their first client or have they worked with hundreds of clients like you?

•  Can they provide references? Even if you became acquainted with your CPA from a friend, it’s never a bad idea to get more references if you can.

•  Will they represent you during an IRS audit? Having a professional explain your finances to the IRS can be a huge weight off your shoulders should you ever be audited.

•  What type of services can they offer? It’s possible they can help you with something you haven’t thought of. Get a full rundown of everything they do — you may end up hiring them for additional services that can help you run your company.

The Takeaway

Finding an accountant for your small business can be a huge weight off your shoulders and allow you to focus more on the business side of things. Just make sure to do your research and due diligence to ensure you find a CPA that fits your company’s needs and future goals.

If you’re seeking financing for your business, SoFi is here to support you. On SoFi’s marketplace, you can shop and compare financing options for your business in minutes.

FAQ

Is a CPA worth it for a small business?

Yes, a CPA (certified public accountant) can be invaluable for small businesses. They provide expertise in tax planning, financial reporting, and compliance. This can help ensure your business meets regulatory standards and avoids costly errors. CPAs can also offer strategic advice on managing expenses, optimizing cash flow, and scaling operations. While hiring a CPA is an investment, their insights can help you make informed financial decisions that could allow you to save money in the long run.

How to find the right CPA for your business?

To find the right CPA (certified public accountant), you might start by asking for recommendations from colleagues, other small businesses in your community, and any connections you have with local professional organizations (like the Chamber of Commerce or Rotary Club). You might even be able to get a referral to a good CPA from your bank or realtor. Once you have a list of candidates, it’s a good idea to interview each CPA to assess their expertise, communication style, and fees. You’ll want to be sure they understand your business goals and will be a good fit with your company.

What type of accountant is best for a small business?

For small businesses, a CPA (certified public accountant) or small business accountant with experience in your industry is ideal. They should offer services tailored to your needs, such as bookkeeping, tax preparation, and financial strategy. A CPA can be a good choice if you need guidance on complex tax laws, regulatory compliance, or business growth planning. If your needs are basic, on the other hand, a general accountant or bookkeeper might be sufficient. Ultimately, the best choice will depend on your business size, complexity, and long-term financial goals.

Photo credit: iStock/VioletaStoimenova

SoFi's marketplace is owned and operated by SoFi Lending Corp.
Advertising Disclosures: The preliminary options presented on this site are from lenders and providers that pay SoFi compensation for marketing their products and services. This affects whether a product or service is presented on this site. SoFi does not include all products and services in the market. All rates, terms, and conditions vary by provider. See SoFi Lending Corp. licensing information below.

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.

This content is provided for informational and educational purposes only and should not be construed as financial advice.

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.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

SOSMB-Q424-078

SBA 504 loans are a popular financing option for small businesses looking to purchase real estate, acquire major equipment, or invest in long-term growth. These loans, backed by the Small Business Administration, provide affordable, fixed-rate funding and are designed to support economic development and job creation.

To qualify, businesses must meet specific size, purpose, and operational criteria, and the application process involves collaboration with Certified Development Companies (CDCs).

Keep reading to learn more on SBA 504 loans, including the qualifications, benefits, and steps to apply for an SBA 504 loan.

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What Is an SBA 504 Loan?

An SBA 504 loan is designed to provide businesses with financing for major fixed assets. The goal is to help fuel both business growth and job growth using long-term financing up to $5.5 million. This program differs from the popular SBA 7(a) loan option, which lets borrowers use funds for working capital as well.

Although SBA 504 loans are structured through the U.S. Small Business Administration (SBA), potential borrowers must apply for funding through Certified Development Companies (CDCs).

These are approved lending partners that focus on local economic development. Approved borrowers receive 90% of their financing needs and must provide the remaining 10%. There are three maturity term options for SBA loans: 10 years, 20 years, or 25 years.

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504 Loan Interest Rates

The borrower’s interest rate starts with a base rate, using either the current five- or 10-year U.S. Treasury notes market rate. Then an increment above that amount is used to calculate the interest rate for the loan.

Rates are fixed for the life of the loan. They’re typically low compared to other types of business financing.

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What Can an SBA 504 Loan Be Used For?

The SBA outlines specific categories that 504 loan funds can be used for, as well as items that can’t be paid for using these funds.

Eligible assets you can purchase with these funds must be aimed to create job growth. This could include purchasing or constructing buildings, land, new facilities, machinery, or equipment.

The funds may also be used to improve or modernize land, streets, parking lots, landscaping, and utilities.

Prohibited expenses include working capital, inventory, debt consolidation, and rental real estate. In order to finance some of these categories, you might instead consider financing from the SBA or conventional small business loans.

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SBA 504 Eligibility Requirements

SBA 504 loans are available to for-profit companies that have a tangible net worth of under $15 million. Additionally, the average net income must have been under $5 million (post-federal taxes) for the previous two tax years.

Applicants must also not have other resources available to them. Lenders review both the business’s assets and the owner’s personal assets, which may reduce the approved loan amount if they’re too high. The company’s cash flow and projected cash flow are also evaluated to ensure that it can afford to repay the loan. A personal guarantee is also required.

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What Is a CDC Lender?

A Certified Development Company (CDC) is a non-profit organization focused on economic development in its local community. CDCs must be certified by the SBA and are regulated by the SBA as well.

CDCs review and approve applicants for the 504 loan program. Once a loan is approved, the CDC funds 40% of the loan amount through SBA funds, then sells 50% of the loan amount to a bank or other financial institution. The business must provide the remaining 10% of the funds.

CDCs are the only organizations certified to offer 504 loans. In order to apply for this type of financing, companies must find a local CDC through the SBA.

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Pros and Cons of an SBA 504 Loan

Pros of 504 Loans

504 loans come with several distinct benefits:

•   Low, fixed interest rates

•   Large maximum loan amounts compared with other funding that’s typically available

•   Low 10% down payment

In short, this can be an extremely affordable form of financing for small businesses ready to make major purchases or improvements.

Cons of 504 Loans

Of course, there are downsides to consider as well:

•   Restricted use of funds

•   The project you’re financing must lead to business and job growth in the community

•   A personal guarantee is also required in addition to a 10% down payment. This is your binding promise that if the business can’t pay back the loan, you will personally be responsible.

Depending on your project, it may be worth comparing the SBA 504 vs. 7(a) loan programs to find the best small business loan option for you and your funding needs.

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How to Apply for an SBA 504 Loan

Applicants submit their applications directly through a local CDC.

In addition to providing company and personal financials, you’ll also need to submit a “Statement of Personal History” to confirm the good character of all company principals. It looks at their past history of repaying debt as well as any legal history.

You must also show a business plan that outlines the projected costs you expect to incur. The CDC you work with will give you a specific list of required documentation.

Be aware that the loan approval process can be long. Many CDC lenders estimate it takes an average of one to three months before approved applicants will receive funding.

Recommended: Guide to Typical Small Business Loan Requirements

Alternatives to an SBA 504 Loan

There are many other options to consider instead of an SBA 504 loan depending on what exactly your needs are.

•   SBA 7(a) Loan: Funds can be used more broadly with an SBA 7(a) loan, including for working capital and inventory.

•   Online Business Loan: You can apply for an online business loan. Rates are typically higher, but the application process is usually faster.

•   SBA Express Loan: For smaller loan amounts that can offer a fast turnaround time, you could also consider an SBA Express loan. These provide up to $500,000.

•   Equipment Financing: Private lenders offer equipment financing to purchase assets. These loans are typically secured by the equipment itself. However, some lenders may also require a personal guarantee.

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The Takeaway

There are many different types of small business loans. The best financing option for your small business depends on your company’s finances, funding needs, and business structure. Whether you choose an SBA 504 loan or another type of financing, be sure to compare multiple options.

If you’re seeking financing for your business, SoFi is here to support you. On SoFi’s marketplace, you can shop and compare financing options for your business in minutes.

FAQ

Am I eligible for an SBA 504 loan?

There are several requirements you must meet in order to be eligible to apply for an SBA 504 loan. Your business’s tangible net worth should be less than $15 million and average net income must be under $5 million.

How can I use the SBA 504 loan?

SBA 504 loan proceeds must be used to purchase or improve assets that lead to business and job growth. This includes things like buildings, land, equipment, streets, utilities, parking lots, or landscaping.

What is a CDC lender?

A Certified Development Company (CDC) is an SBA-certified non-profit organization that administers 504 loans. CDCs focus on improving economic development in communities. You can find CDCs in your area by searching the SBA database of approved organizations.

What are the pros and cons of an SBA 504 loan?

SBA 504 loans come with low, fixed interest rates. Plus, at $5.5 million, the maximum loan amount is quite high. On the downside, funds can only be used for approved purchases and a 10% down payment is required, as is a personal guarantee for the funds.

Photo credit: iStock/svetikd

SoFi's marketplace is owned and operated by SoFi Lending Corp.
Advertising Disclosures: The preliminary options presented on this site are from lenders and providers that pay SoFi compensation for marketing their products and services. This affects whether a product or service is presented on this site. SoFi does not include all products and services in the market. All rates, terms, and conditions vary by provider. See SoFi Lending Corp. licensing information below.

This content is provided for informational and educational purposes only and should not be construed as financial advice.

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.

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.

SOSMB-Q424-077

If you rent commercial property or lease office space to run your business, you’ll likely want (and may, in fact, be required) to get business renters insurance.

While landlords generally carry property insurance for their buildings, they typically won’t take responsibility for any business property a tenant keeps in the space.

Business renters insurance can cover the repair and replacement of business assets (like furniture or equipment) in the event of a fire, theft, or vandalism. It can also cover legal or medical costs related to any accidents that take place on the premises. If you’re just starting your company, this type of business insurance can be especially important, since you may lack the cash to cover an unexpected event or loss.

Here’s a look at how business rental insurance works, what it covers, plus how to get the right coverage for your business at a cost you can afford.

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What Is Business Rental Insurance?

Business rental insurance (also known as business renters insurance or commercial renters insurance) is a type of insurance that small business owners purchase when they lease or rent a space for their business that they do not own. It is separate from the insurance that the property owner has for the actual building.

Business renters insurance policies are typically a combination of a general liability policy that covers basic accidents and disasters and a commercial property policy, which covers items, supplies, and equipment you may keep inside a rental location.

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What Does Business Property Insurance Cover?

Business renters insurance policies typically cover damage or destruction of properties due to fire, vandalism, adverse weather conditions, and other common risks. It also generally includes insurance against theft of your business assets. The type of property that is covered usually includes office equipment, manufacturing equipment, inventory, business records, and, in some cases, cash.

Business rental policies also often include premises liability coverage, which protects you in case you are liable to your landlord for damages to the property. Liability coverage also helps to protect your business from claims that may be filed if a person is injured on the premises — a type of coverage that is sometimes referred to as a “slip and fall” policy.

What’s not covered? A standard business rental policy might not cover flood damage. If you operate in a location where floods are common, you can choose to purchase additional coverage for flood damage. Coverage for your employees’ possessions may also require an additional policy rider, although some policies do include some protection of this type.

Another type of add-on you may want to consider is business interruption insurance, which reimburses you when you can’t operate your business due to theft or property damage.

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How Is Insurance Cost Determined?

The cost of your business renters insurance will depend on a number of factors, including:

•  The size of your business

•  The type of business you have

•  The location of your business

•  The number of people you have employed

•  The value of your equipment

•  Your claims history, if any

Larger businesses, with larger rental spaces, are typically more vulnerable to risks and tend to have to pay higher premiums. Getting additional coverage will also increase costs.

Your premiums will likely also depend on the typical risk factors that insurance companies use to determine policy prices. These include fire risk, based upon how the building where you are renting is constructed, whether it has a sprinkler system, and its distance from a fire station.

Properties in high-crime areas often incur higher premiums for theft insurance, as do businesses that have particularly valuable or desirable inventory or equipment.

Another factor that can influence cost is whether you choose “replacement cost” or “present value coverage” for your equipment and inventory.

•  Replacement cost: Coverage is typically more expensive, but it will reimburse you for the full amount you need to buy new items.

•  Present value coverage: Reduces the amount you are paid by taking into account the age of your damaged or stolen property (known as depreciation).

Recommended: Comparing Amortization and Depreciation

Why Do Landlords Require Liability Insurance as Part of Your Lease?

If you lease space for your business, the landlord will likely require you to have your own liability coverage.

The reason is that if someone gets injured inside the space you rent, the landlord’s business insurance may not cover it. It’s generally in the landlord’s best interest that your business has the financial and legal resources to address the situation.

If an injured person sues, for example, the case could get expensive — and, with your insurance company’s attorneys defending your case, this helps your business financially and also protects the landlord from needing to become involved.

When tenants are adequately protected by a business rental and liability policy, it can save the landlord time, money, and hassle.

If you are looking to rent a space for your business, it can be a good idea to get clarity from the landlord about what is covered under their business property insurance and what type of property and liability coverage they require tenants to have.

What Types of Businesses Need Property Insurance?

Nearly every small business that rents or owns business space needs business property insurance. The reason is that it helps to protect not only the space you operate in, but also your equipment, belongings, employees, customers, vendors, and visitors who spend any length of time in the building.

Plus, depending upon how the policy is structured and what it includes, it can also provide a range of legal and financial protections, such as reimbursing you for any interruptions to your business due to an unforeseen event.

How to Find the Best Insurance Policy for Your Business

If you’re starting a small business or you’re moving to a new commercial space, it can be a good idea to shop around for the right rental insurance policy, keeping your business assets, risk tolerance, and what coverage is required by your lease in mind.

Even if you’re still negotiating your business lease, you may want to start researching your insurance options. Some ways to get started include:

•  Consulting directly with an insurance company: You can work with a company directly to build a policy that fits your needs. You may want to call two or three and compare costs and coverage options.

•  Searching the online marketplace: You can use online marketplace platforms to get quotes and compare multiple carriers that offer business renters insurance.

•  Using an insurance agent or broker: They can give you access to quotes from multiple carriers and help you navigate through different policy options.

How Does Insurance Factor Into Your Small Business Loan?

Some small business lenders require you to have a certain amount of insurance coverage when you apply for a small business loan. Why? Just like a landlord, a lender typically wants to know that you’ll have the necessary resources to navigate a natural disaster, slip and fall lawsuit, or other financial or legal challenges, and still make your loan payments and continue to run your small business.

The lender may regularly check to make sure the policy is still in place.

Recommended: Small Business Loans for Rental Property

The Takeaway

Getting business renters insurance can be an effective way to secure your rented business space from any unforeseen circumstances and allow for financial stability.

A good business renters insurance policy will not just protect you and your employees from any sort of loss or injury, but can also help cover any legal or medical expenses that might come your way.

While your landlord might have their own insurance policy in place, that policy can have limitations that could end up costing you a large sum of money. Your landlord may also require you to have business rental insurance.

In addition, you may need to show proof of business rental insurance in order to get a small business loan.

If you’re seeking financing for your business, SoFi is here to support you. On SoFi’s marketplace, you can shop and compare financing options for your business in minutes.

FAQ

What does business rental insurance cover?

Business rental insurance typically covers damage to the rented property caused by events like fire, theft, or vandalism. It also provides liability protection for accidents or injuries that occur on the premises and may extend to covering the tenant’s equipment, inventory, or furniture within the space.

Why is business rental insurance often required?

Many landlords require business rental insurance to ensure tenants can cover potential damages to the property and minimize disputes over liability. It also protects both parties by providing a financial safety net in case of accidents or property damage.

How can a business choose the right rental insurance policy?

Businesses should evaluate their specific risks, such as natural disasters or high foot traffic, and choose a policy that offers adequate liability coverage, protection for valuable assets, and additional options like loss of income coverage if operations are disrupted. Consulting an insurance broker can help tailor the policy to specific needs.

Photo credit: iStock/sturti

SoFi's marketplace is owned and operated by SoFi Lending Corp.
Advertising Disclosures: The preliminary options presented on this site are from lenders and providers that pay SoFi compensation for marketing their products and services. This affects whether a product or service is presented on this site. SoFi does not include all products and services in the market. All rates, terms, and conditions vary by provider. See SoFi Lending Corp. licensing information below.

This content is provided for informational and educational purposes only and should not be construed as financial advice.

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.

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.

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While minority businesses have often faced barriers in accessing capital, there are now a growing number of small business loan programs designed specifically for minority entrepreneurs. Many of these funding opportunities also offer additional resources, including business training, mentors, and workshops.

Minority-owned businesses are those with 50% or more ownership by a Black, Hispanic, Native-American, Asian, or another racial or ethnic group. In many cases, women-owned small businesses also qualify.

Read on to learn about minority and Hispanic business loans, grants, and other resources that may help open doors for your small business.

💡 Recommended: How To Get a Small Business Grant

What Are Minority Small Business Loans?

Any business owner, regardless of ethnic or racial background, can apply for a small business loan. However, there are also small business loans designed to provide more access to this financing in underserved markets. These loans often offer competitive rates, yet have more flexible qualification requirements than traditional business loans. These lenders are looking to support businesses like yours and give them an even playing field among other small businesses.

Recommended: Success Secrets of Hispanic Owned Businesses

Who Qualifies for Minority Small Business Loans?

Specific qualifications for individual loans will vary from one lender to another, but the biggest criteria is that a majority (at least 51%) of the business must be owned and run on a daily basis by a minority.

The Small Business Administration (SBA) recognizes these groups as minorities:

•  African Americans

•  Asian Americans

•  Hispanic Americans

•  Native Americans

For many loans, women are also considered minorities.

Recommended: Small Business Loans for Sole Proprietors

Finding Minority Business Funding Options

As you’ll see below, there are many options when it comes to minority business loans. Often, the biggest challenge is knowing which to apply for.

Before applying for a business loan, you’ll want to look closely at the qualifications, including what type of business owner the loan is targeted to, time in business, annual revenue, credit scores, and if there are any restrictions on how the funds need to be used.

Once you find loan options that may be a good fit for your business, you would be approved for small business funding and at what interest rate without the lender doing a hard credit check. This allows you to compare small business loans and offers without impacting your credit.

Recommended: Guide to Small Business Expansion Loans

Minority Business Loan Options

Below are some minority loan options for both startups and established businesses.

Minority SBA Loans

The U.S. Small Business Administration (SBA) offers several loan programs, some of which are designed specifically for underserved communities.

8(a) Business Development Program

While it’s not a loan program, the SBA’s 8(a) Business Development program aims to help small disadvantaged businesses (many of which are owned by minorities) by awarding at least 5% of all federal contracting dollars to these businesses. Disadvantaged business owners who participate in the SBA’s 8(a) Business Development program also have a better chance of qualifying for SBA loans.

To qualify for the 8(a) program, your business must be at least 51% owned and controlled by U.S. citizens who are economically and socially disadvantaged, and have been in operation for two years or more. In addition to securing federal contracts, approved businesses can also get business assistance, mentorships, and free training.

Community Advantage Loans

Another SBA small business loan option may be the SBA’s Community Advantage Loan program, which is specifically designed to meet the needs of business owners in underserved communities. To qualify for an SBA community advantage loan, which provides up to $250,000 in capital, business owners need to have good credit and a strong business plan. However, the business’s balance sheet and amount of collateral will not affect eligibility.

To find a Community Advantage Loan in your area, you can ask your current financial institution for a list of local lenders that participate in the program or consult this SBA chart.

Microloans

If you are looking for a smaller loan to either start or expand a business, you may want to check out the SBA’s microloan program. The program is administered by an intermediary network of nonprofit community-based lenders, rather than traditional banks.

Through these lenders, the SBA aims to reach lower-income communities and minority-owned businesses that are often overlooked by traditional lenders. These microloan options come with low interest rates, six-year terms, and up to $50,000 in capital.

Accion

Accion’s mission is to “build a financially inclusive world with access to economic opportunity for all.” The organization does this through free events, training, and workshops, as well as by offering minority business loans.

Its Accion Opportunity Fund provides working capital for minority businesses of $5,000 to $100,000, and is quick and easy to apply for online. To qualify, your business must have been open for at least 12 months, and you must have at least $50,000 in annual revenues.

Accion also offers online resources, events, and networking opportunities (in Spanish and English) to help minority business owners learn and scale their companies.

U.S. Bank’s Business Diversity Lending Program

U.S. Bank is a nationwide bank with an eye on supporting diversity and minority businesses. Its Diversity Lending Program supports woman-, minority-, and veteran-owned businesses by lending qualified applicants up to $250,000.

Specific qualifications vary depending on which kind of financing a business owner is accessing.

The Business Consortium Fund

The Business Consortium Fund (BCF) says its mission is to expand capital access for small businesses across the United States to advance a more inclusive and equitable society. It focuses on minority business enterprises operating in the supply chains of the nation’s largest corporations and government organizations.

A loan officer will guide you through the qualification process and loan options.

Indian Loan Guarantee Program

Run by the U.S. Department of the Interior, the Indian Loan Guarantee and Insurance Program (ILGP) is designed to help American Indian and Alaska Native businesses overcome barriers to conventional financing at reasonable rates.

To qualify, you must be an individual who is an enrolled member of a federally recognized American Indian and Alaska Native tribe or group and own at least 51% of your business. You must also have at least 20% equity in the project you want financed, and that project must benefit the economy of a reservation or tribal service area.

State and Local Loans for Minorities

Loans targeted to minority business owners are often offered at the state and local levels. In many cases, these loans focus on specific industries or for specific uses. It’s worthwhile to research your state’s minority-focused loan programs, grants, and resources.

CDFI Loans

The Community Development Financial Institutions Fund (CDFI Fund), which is part of the U.S. Treasury, gives funds to companies and organizations throughout the U.S. that help underserved people and communities. Minority business owners can reach out to local banks and nonprofit groups that have received CDFI funds to discuss and apply for low-cost business loans.

Office of Hawaiian Affairs Mālama Loan

If you are a business owner of Native Hawaiian ancestry, you may be eligible for an OHA Mālama Business Loan. Approved applicants can borrow $2,500 to $149,999 with repayment terms of up to seven years. You must be a resident of Hawaii, be registered with the OHA Hawaiian Registry, have a credit score of 600 or higher, and a debt-to-income ratio of 45% or less.

Recommended: The Best Metros in the U.S. for Underrepresented Business Owners

Minority Business Loan Options vs Conventional Small Business Loans

There are a wide variety of business loans available to minority businesses, including loans specifically targeted to underserved communities and conventional loans that are available to all small businesses. Which type of financing is best for your business? There are pros and cons to each. Here’s how they compare.

Recommended: What Are Working Capital Loans?

Grants for Minority Business Owners

A minority business loan isn’t your only option for funding. It may also be possible for your business to qualify for a small business grant.

The chief benefit to business grants vs. loans is that grants, unlike loans, don’t have to be repaid. Make sure to explore both minority business loans and grants to find the best source of capital for your business.

Recommended: 20 Small Business Startup Grants, Programs and Checklists 2025

Grants.gov

Grants.gov is the largest database of federal grant opportunities. While most grants are not specifically targeted to minority small business owners, awards are available for all types of entrepreneurs, especially those focused on healthcare, U.S. defense, and environmental protection.

USDA Rural Development Grants (RBDG)

The USDA’s Rural Development Grant is available to businesses in rural communities that have fewer than 50 employees and less than $1 million in gross revenue.

This type of small business grant varies in size and can be used for a wide range of projects that aid business development in rural areas, including training, technical assistance, acquisition or development of land, building construction or renovations, equipment purchases, and pollution control.

Recommended: 30 Small Business Grants and Databases for Women in 2024

FedEx Small Business Grant Contest

FedEx has been holding its Small Business Grant Contest for over a decade. Though not specifically targeted to minority businesses, any qualified small business can enter the contest for a chance at winning grant money. In the most recent year, FedEx provided one $50,000 grant and nine $20,000 grants. Check the contest website for future opportunities.

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Small Business Resources for Minorities

Here is a look at other resources available for minority business owners.

MBDA

The Minority Business Development Agency advocates for minority-owned businesses, and offers workshops, events, research, and conferences to help underserved entrepreneurs. Its Enterprising Women of Color Initiative is aimed to help minority women succeed in business.

U.S. Minority Chamber of Commerce

The U.S. Minority Chamber of Commerce (UMCC) has locations in most cities and actively promotes the economic growth, development, and interests of minority-owned businesses. Members have access to events, training, and other business resources to support them in their growth.

Recommended: 20 Small Business Startup Grants, Programs and Checklists 2025

The Takeaway

Whether you’re looking to start a minority business or expand an existing one, you’ll likely need access to capital to turn your vision into a reality. There are several sources for funding and search tools that can help you as you hunt for funding to make your small business dreams become a reality.

If you’re seeking financing for your business, SoFi is here to support you. On SoFi’s marketplace, you can shop and compare financing options for your business in minutes.

FAQ

What can you use minority business loan funds for?

Some minority loans for business have strict requirements about what you can and can’t use them for, but generally speaking, you can use them for a range of business purposes, including working capital, purchasing inventory, hiring staff, and buying equipment.

Can you get minority business loans with bad credit?

Some minority loans have less stringent credit requirements than traditional bank loans and look at other criteria, such as annual revenues, to determine eligibility.

Do you need a business plan to apply for a minority business loan?

Typically, yes. Lenders (both minority-focused and conventional) often want to look at an applicant’s business plan.

What can I spend a minority grant on?

Some grants may stipulate what you can spend the money on (such as a project that benefits an underserved community), while others offer more flexibility.

Who qualifies for minority-owned business loans?

Typically, the business must be owned and operated by a minority with at least a 51% stake in the company. There may also be other requirements, such as credit scores, time in business, and annual revenues.

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Photo credit: iStock/RichLegg

SoFi's marketplace is owned and operated by SoFi Lending Corp.
Advertising Disclosures: The preliminary options presented on this site are from lenders and providers that pay SoFi compensation for marketing their products and services. This affects whether a product or service is presented on this site. SoFi does not include all products and services in the market. All rates, terms, and conditions vary by provider. See SoFi Lending Corp. licensing information below.

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.

This content is provided for informational and educational purposes only and should not be construed as financial 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.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

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