The city of Chicago is known for its storied history, its midwestern charm, and its robust business community that’s made up of a wide variety of industries. Like any major urban area, Chicago presents challenges for entrepreneurs who want to start and grow a business, but knowing what’s ahead makes it easier to prepare.
Whether it’s applying for financing, navigating complex regulations, or finding the right market for your business idea, these challenges shape the business landscape and impact your Chicago-based business.
In this overview, you’ll learn about these challenges and how Community Development Financial Institutions (CDFIs) can help you start and grow a thriving business in Chicago.
What challenges are Chicago small businesses facing?
Like many entrepreneurs in major cities, small business owners in Chicago face many economic and legal challenges. Here are a few specific to the Windy City:
- Limited access to capital: The city of Chicago faces broader economic inequalities, which means that Chicago entrepreneurs may have a harder time securing capital to start and grow their businesses. Many communities on the South and West Sides experience significantly lower investment levels than wealthier neighborhoods, creating cycles of poverty and limiting opportunities for local businesses to thrive.
- An expensive retail market: The costs for retail spaces in the city are some of the highest in the Midwest, making it difficult for small businesses to afford prime locations. In 2024, the average rent for retail space in Chicago was $28 per square foot, which is $5 more than the U.S. average.
Finding the right sized retail spaces is also a challenge for Chicago-based entrepreneurs. Many retail spaces in Chicago are larger than what a small business needs, which presents this dilemma: do you lease a space that’s bigger than what you need and above your budget, or do you wait even longer for a more appropriately-sized space to become available? - Complex regulations: Chicago’s regulatory environment includes complex permitting processes, high taxes, and extensive compliance requirements. Businesses often deal with zoning restrictions, health codes, and labor regulations that vary widely between neighborhoods. For small businesses with limited resources, these hurdles can cost valuable time and money to learn, prepare for, and meet, making it harder for you to compete and scale operations.
In recent years, there have been efforts to streamline permitting processes, like introducing more transparent digital systems and cutting unnecessary red tape. Some initiatives, like the Express Permit Program, have expedited approvals for simpler projects, but more reforms are needed to create a more business-friendly environment in Chicago.
While many of these challenges are beyond a business owner’s control, accessing financing to start and grow doesn’t have to be a struggle. If your business is unable to qualify for traditional financing options, there are other responsible options available to you.
How to access affordable financing for your Chicago small business
The first stop for small business financing is likely your bank, but if your Chicago-based business is unable to qualify, you can explore alternative options through U.S. Small Business Administration (SBA) programs and responsible lenders like CDFIs. Here, you can find affordable capital and resources to empower your business to start, grow, and take on new opportunities.
Explore what’s available for Chicago businesses:
CDFIs
CDFIs are nonprofit financial institutions dedicated to helping small businesses succeed. They’re certified by the U.S. Treasury and must meet specific metrics of providing financing to underserved entrepreneurs and communities. Here are some of the benefits of working with a CDFI:
- Gives access to capital for underserved communities: CDFIs are driven by their mission to serve entrepreneurs and businesses in historically underserved areas. They offer programs and products that allow them to take on more risk, which allows them to offer more flexible qualification criteria. This widens the strike zone for businesses who have faced challenges in securing loans and makes it more possible to get financing to start or grow a business.
- Offer no-cost support to small business owners: Many CDFIs also offer affordable and no-cost resources to their borrowers, such as business planning, financial literacy training, and mentorship. These resources can help you navigate Chicago’s regulatory environment, find the most lucrative channels to market your business, and position you for long-term success.
- Support businesses at all stages: Start-ups and some industries may be too risky to qualify for conventional financing. CDFIs can offer loans to early-stage business by using financial projections, and can offer loans to a wide range of industries. This gives many business owners who don’t have access to generational wealth the chance to start and grow their businesses with affordable and responsible loan options.
Your SBA loan options
There are many SBA-backed programs that offer beneficial terms and flexible qualification criteria. These programs can be offered by banks, CDFIs, and Certified Development Companies (CDCs). Here are just a few to explore for your business.
- SBA 504 loan program: This program provides long-term, fixed-rate financing up to $5.5 million for major fixed assets, including owner-occupied real estate and heavy equipment. It can also be used to refinance debt for the previously mentioned uses.
- SBA 7(a) loan program: The most popular and versatile SBA program, the 7(a) loan program offers loans from $50,000 to $5 million for startups and growing businesses, with repayment terms of up to 10 years for most loans.
- SBA Microloan: Microloans are available for up to $50,000 and can be used for working capital, equipment purchase, debt refinance, and more. The application is simple, and decisions are often made within a couple of days, with funds in the bank within a week for approved applicants.
The path forward for your Chicago business
Chicago small businesses operate in a challenging environment shaped by systemic inequities, high costs, and regulatory hurdles. However, solutions like CDFI financing offer a way to overcome these barriers. By leveraging these resources, you can build a thriving business that contributes to the city’s economy and ensures a more equitable future for all Chicagoans.
Addressing these barriers and supporting more equitable economic opportunities are crucial for Chicago’s continued growth. With the right mix of policy reforms, innovative approaches to space usage, and financial support from organizations like CDFIs, the city can foster a thriving business landscape that benefits all its residents.
Pursuit can take your business to new levels
Pursuit is a leading alternative lender and CDFI serving small businesses across New York, New Jersey, Pennsylvania, Connecticut, Nevada, Illinois, and Washington. We provide more than 15 loan options, business advisory services, and insightful resources.
We’ve helped thousands of small business owners get the funding they need to achieve their goals and dreams, and we can help you, too.
Apply now so we can help your business reach higher and grow!
