Pathway Lending 101: Financing Businesses, Strengthening Communities

Our Women’s Business Center is a non-profit powered by the Small Business Administration that offers educational programming for entrepreneurs at all stages of business. We’re part of Pathway Lending, a mission-driven Community Development Financial Institution that finances businesses and strengthens communities. We’re a solutions provider and we want to help.

Many of you know us for our educational resources and events for women and minority business owners, but our relationship with Pathway Lending brings a range of lending solutions to support businesses across the state. As Tennessee’s largest Community Development Financial Institution, Pathway focuses on underserved markets. Small businesses that may not qualify for traditional financing have options, and if you’re ready to grow your business to the next level, we may be able to help.

Selected Small Business Loans from Pathway Lending

Microloans are ideal for early-stage businesses needing permanent working capital, equipment, or inventory. With your micro-loan, you are partnered with a member of our Advisory Services team, a valuable resource who’ll help you navigate business decisions and effectively manage your loan.

Tanocha Thedford successfully operated her catering business Big Momma’s & Granny’s Catering for several years when Epicenter, Pathway Lending’s partner in Memphis, referred her to Pathway Lending for a loan to help establish her first retail storefront. She is meeting with her Pathway Business Advisor monthly to refine her pricing, staffing and service models.

Working Capital loans are designed for growth-stage businesses when having cash on hand is especially important. This product is designed to help entrepreneurs with growing, developing, and sustaining their business in a time when conventional sources of capital are difficult to come by.

With Ha.Le Mind & Body, Janice Cathey had created a new integrative platform of care combining acupuncture, bodywork, counseling and movement that truly benefits her clients. After several years of successful operations, she was ready to expand her business but had trouble getting a line from a traditional bank despite a proven business model and loyal client base, so she turned to Pathway.

These are just a few of the flexible loans Pathway Lending offers. We believe in entrepreneurs like you, and we’re dedicated to getting you the capital you need to successfully start or grow a business. Our loans feature longer terms and payback periods, and more reliance on your opportunities, instead of just your historical performance.

4 Must-Know Financial Concepts Before You Go For A Small Business Loan

Get loan-ready with these four basic small business loan concepts

Get the Cheat Sheet and get loan-ready with the small business loans basics.

1. Debt-service coverage ratio (DSCR)

What It Means | This equation calculates how much cash you have left after paying expenses to run the business to make all your debt payments, expressed as the number of times (“x”} you could cover the payments.

Why It Matters | Lenders commonly use this calculation as a measure of the loan amount your business can afford to repay (each month or each year):

<1X | Cannot afford to pay without borrowing more

~1X | Dip in cash flow may affect payment

>1X | Enough income to cover debt payments – most lenders want DSCR above this

2. Access to credit and payments

What It Means | Repaying a loan most often takes place gradually over time in monthly payments. Part of the payment goes to the balance you have left to repay, called the principal. The other part of the payment covers interest and fees, what the lender gets paid for making the loan. So the loan amount, your interest rate, fees and the length of the loan all go into determining your monthly payment.

Why It Matters | The cost of the loan goes up or down according to how likely your lender thinks you are to repay your loan in full. and so do the requirements for how often you’ll make payments and how long you have to repay the loan.

A lower monthly payment doesn’t mean a loan is affordable or costs less. Lenders can lower the monthly payment by adding more time to repay the loan and actually increase the amount of interest you pay back and with it the total cost of the loan.

3. Loan term

What It Means | Loan term refers to how long the lender gives you to pay back the loan. With shorter repayment periods lenders generally assume your ability to repay the loan won’t change and may charge less interest.

Why It Matters | The longer the term, the longer you’ll pay interest on the loan. Calculating all of those interest payments is key to knowing the total cost of the loan.

4. Credit score and credit history

What It Means | Lenders look to your credit score and credit history to gauge your track record of paying bills on time and an indication you’ll repay your loans on time. too. With better credit come stronger chances a lender will offer more favorable interest rates or loan terms with your loan.

Why It Matters | Over the life of a loan. small differences can really add up. In the case of an equipment loan. the cost to pay back the loan in 5 years or 10 years differs by almost $12,000 over the life of a loan. The difference would be even greater for a larger or longer-term loan.

How Lenders Make Loan Decisions

Most of the information above you give a lender with your application that the lender evaluates to decide to make the loan or not. If approved, the lender will send the funds, and you’ll start making payments.

Loan decisions are about more than just numbers. Your relationship with the lender and how you present your business matters, too. Different lenders use different criteria and lenses for understanding your ability to repay.

Small businesses that don’t qualify for traditional financing still have options. Nonprofits like Pathway Lending, which has a mission to strengthen communities by financing businesses, provides flexible loan products and business services in the Southeast U.S.


Get in touch

If you are already in business and would like to talk to a lender about your financing options, drop us a note and we’ll connect you.