When a business needs financing, the U.S. Department of Agriculture (USDA) probably isn’t at the top of the list for resources.

Situation

Most business owners have goals to grow and scale their business.  They often worry more about failure than success when it comes to growth, but success can come with a new set of unanticipated challenges.  Missteps during an expansion phase could hinder a businesses’ chances for long-term success, creating challenges like those below.

Your business needs capital in order to grow and you need to figure out what option is best for you and your company down the road. On one hand, you could sell some of your equity to an investor, but that means giving up some control over the business. On the other hand, you could take out a business loan to fund your business's needs without giving up any control. If you're applying for your first business loan, there are five key steps you need to take to ensure the process goes smoothly and to increase your chances of approval.

Step 1: Gather Financial Documents

Before you begin the process of applying for a business loan, you need to have a clear picture of your business's financial health. You also need to make sure that you have a good grasp on your personal financial situation. Collect all of your financial documents including bank statements, loan documents, taxes, assets, and any investments. You'll also want to produce a profit & loss statement and a balance sheet for your company. Since you're the owner of the company, your personal financial and tax information are also going to be important.

Step 2: Assess Your Cash Flow

With your financial documents all in one place, you'll be able to see exactly where your money is coming from, how much of it is coming in, and what your expenses are. By taking these numbers into consideration, you can evaluate your ability to make payments on a loan. It will also reveal ways you could potentially save money by reducing expenses, consolidating operations, or some other move that would improve cash flow. Taking this step now will make it easier to convince a lender to make the loan when you're ready.

Step 3: Look at Your Potential Collateral

In some cases, you may be required to provide some form of tangible collateral in order to secure a business loan. Very often, this is the case with larger loan amounts, or when the borrower has limited cash flow. Collateral can take many forms including equipment, machinery, and other property that holds adequate value to cover the loan amount should you default. The lender places a lien on the collateral which is released once the terms of the loan have been met. What that means is that the lender attaches a notice to your property that you owe them money and that they are entitled to your property if you don't pay it back.

Step 4: Research Your Credit History

Even if your numbers look good for your business, meaning you have a profit margin and regular revenue, lenders look at credit history. If you, or your company, has a blemished credit history, it can result in a declined application. Obtain a copy of the credit report from the three major reporting agencies for the company and your own personal credit report as well. Be sure to review the reports carefully and address any errors, or issues before speaking to a lender.

Step 5: Prepare a Business Plan

Perhaps the most important, step towards obtaining a business loan is to prepare a compelling business plan. Lenders want to know that you have a great idea that's well thought out and that you have a solid plan for executing your ideas. Include every relevant fact, figure, and tidbit of information you can about yourself, your partners, your business idea, competition, pricing strategies, marketing ideas, everything. In your Executive Summary, express your passion for your ideas and your commitment to success.

Conclusion

If you're a business owner in Iowa and you need capital, don't worry, we've got you covered. Just follow the five steps above and then contact us at Lincoln Savings Bank to get the loan process started. Just complete the form with some basic information about your business, your capital needs, and your financial situation. Our experts will review your information, and help you find a loan that's right for business's unique needs.  

Lincoln Savings Bank, Member FDIC

For small and medium-size business owners, there likely are times when your personal and business credit scores affect each other. For instance, if you apply for a business loan, chances are the lender will look at both your personal and business credit scores. It’s important to understand the differences between the two so you can protect both.

Almost all business equipment can be financed. As a general rule, any type of new or used equipment that generates income or saves time and labor for your business can be financed. Generally, businesses have two options ─ either securing a loan to purchase the equipment or leasing it. Each method has different advantages.

For small businesses just starting out, or for those that have been in business for a while but need funding to move to the next level, applying for that first business loan is a big step. Business loans aren’t always easy to get. Banks and other lending institutions are very careful about the loans they write – after all, they have a legal and ethical responsibility to take good care of their customer’s money.

So what does a lender look for during the approval process for a small business loan? You’ll need to show that you and your business are a good risk AND that your business idea is not only feasible, but profitable as well. Balancing risk and reward is the goal.

Once you have successfully secured business startup financing and have a sound customer base, you may well find yourself in a position where you need additional capital. Perhaps you need to hire an extra staff person with a specific skill set. Or, to keep up with orders, you need to invest in more equipment.

For a small or medium sized businesses (SMBs), opportunity often comes knocking - with its hand out. As the old saying goes,"it takes money to make money,” and the availability of capital, or lack of it, can make or break a SMB.  

Are you still wondering if mobile payments are going mainstream? Financial technology, otherwise known as FinTech, continues to grow. While businesses have been hearing about mobile payments for years, it appears the adoption rate is picking up steam. A trend report from the market research firm Gartner predicts mobile commerce revenues will grow to half of U.S. digital commerce revenue by 2017. Sooner rather than later, businesses of all sizes will allow consumers to pay for their purchases with their cell phones and other smart devices.

When you can’t raise your prices, the best way to improve your margins is to reduce your costs. Using technology to improve efficiency and productivity is one of the fastest and most effective ways to boost the success of your business.

In particular, online tools provide opportunities to maximize the efficiency of your business operations, saving time and increasing your profitability. Here are five free or inexpensive tools to save time and stay organized in business.

On any given day, you can ask a small business owner what they lack the most and the answer will probably be time or operating capital,  or more than likely both. At Lincoln Savings Bank, we know we can only be successful when we can make doing business easier. With that goal in mind, we’re pleased to introduce one of the first online, alternative lending platforms available in Iowa.