Small Business Loans
Learn All About Small Business Loans in Iowa
The Hawkeye State is the home of almost 290,000 small businesses, which make up approximately 99.3% of all enterprises in the state. From the agricultural strongholds in the west to the insurance and manufacturing hubs in Des Moines and Cedar Rapids, small businesses are the backbone of the state’s economy.
Whether you’re launching an ag-tech startup or expanding a main-street retail shop, finding the right small business loans in Iowa is a key step. Here’s what you should know about securing the right financing for your company.
- Key Points
- • The Small Business Collateral Support Program helps businesses with insufficient assets secure commercial loans.
- • The Targeted Small Business (TSB) program provides certified businesses owned by women, minorities, people with disabilities, and veterans with service-related disabilities with access to specialized loans and procurement opportunities.
- • Manufacturing 4.0 Loan Participation helps industrial firms invest in automation and smart technology to remain competitive.
- • The Linked Investments for Tomorrow (LIFT) program allows the State Treasurer to lower interest rates on small business loans by purchasing certificates of deposit from lenders.
- • Innovation funds like the Proof of Commercial Relevance (POCR) offer financial assistance to certain tech startups to help them validate their market viability.
Popular Types of Small Business Loans in Iowa
Entrepreneurs in Iowa are fortunate to have access to a robust financial ecosystem designed to support the state’s diverse blend of agriculture, industry, and technology. Let’s look at the most common funding options available to business owners across Iowa.
Iowa Small Business Loan Programs
Iowa actively fosters economic growth through the Iowa Economic Development Authority (IEDA). The IEDA manages the State Small Business Credit Initiative (SSBCI), which includes programs like the Manufacturing 4.0 Loan Participation Program to help factories upgrade their technology. There are also innovation funds, like the Proof of Commercial Relevance (POCR) Fund, which offers low-interest funding to certain tech startups to help them validate their market viability. And the Targeted Small Business (TSB) program connects historically underserved entrepreneurs — including women, minorities, people with disabilities, and veterans with service-related disabilities — with low-interest loans of up to $50,000 and access to procurement opportunities.
Additionally, the LInked Investments for Tomorrow (LIFT) program permits the State Treasurer to reduce interest rates on small business loans by purchasing certificates of deposit from lenders, while the Small Business Collateral Support Program aids small businesses in securing commercial loans when they have insufficient assets.
Term Loans
If you obtain a term loan, after approving you, the lender will provide you with an upfront lump sum of capital. Over a specified period of time (the term), you’ll need to make regular payments to repay the loan principal and interest, which is usually charged at a fixed rate. This structure can make a term loan an appealing option for financing large, one-time investments with predictable costs. For example, a bioscience firm in Ames might use a term loan to build a new research lab.
Business Lines of Credit
Unlike a term loan, a business line of credit can let you access a revolving pool of funds that you can draw from when you need funding, up to a predetermined limit. Typically, you’ll pay interest only on the money you actually withdraw, and as you repay the balance, you’ll replenish the pool of funds so the money becomes available for you to withdraw again.
Lines of credit can be helpful for businesses that have seasonal lulls or uneven cash flow. For instance, a seasonal corn producer could use a line of credit to manage operational costs during the planting season, before harvest revenue comes in.
Equipment Financing
If you need to purchase a specific physical asset for your business, like machinery, vehicles, or technology, you might want to apply for equipment financing. For instance, a logistics company in Council Bluffs could use an equipment financing loan to finance a new fleet of trucks, while a farmer in Sioux City might use one to acquire a new combine.
Since the equipment itself serves as collateral for the lender, equipment financing loans may be easier to obtain than unsecured loans. What’s more, they often come with more favorable terms, too.
SBA Loans
SBA loans are provided by private lenders, but they’re partially guaranteed by the U.S. Small Business Administration. This federal backing reduces the lender’s risk so the loan may offer lower down payments and longer repayment terms than other types of loan. If you qualify, these Iowa business loans are available through many approved banks and credit unions.
Here are some types of SBA loans commonly used by small businesses.
• The SBA 7(a) loan. The 7(a) loan is very flexible: Amounts can range from $500 to $5 million. It’s suitable for covering working capital, refinancing debt, or purchasing supplies.
• The SBA 504 loan is specifically meant for companies to use on major fixed assets, such as commercial real estate or heavy equipment. The maximum amount is between $5 million and $5.5 million.
• The SBA Microloan is meant to help with short-term needs and can be useful to companies that need startup loans. You can borrow up to $50,000 and the maximum repayment term is seven years.
An SBA loan calculator can help you estimate what your loan costs might be for different kinds of SBA funding.
Recommended: Small Business Financing Guide
How to Apply for a Small Business Loan in Iowa
Applying for an Iowa small business loan requires preparation and attention to detail. You’ll need to provide prospective lenders with a clear picture of your company’s financial health and a well-thought-out plan for how their funds would be used.
Here’s a step-by-step breakdown of how to apply for a small business loan in Iowa.
Define Your Loan Purpose and Amount
Before you start getting in touch with lenders, you’ll want to have a precise understanding of your company’s funding needs. You should be able to articulate to prospective lenders exactly how much money your company will need, what it will be used for, and how it will generate a return. Being able to make a specific proposal, such as “$50,000 to automate our packaging line, which we project will save us $25,000 yearly” demonstrates strategic thinking and practical financial planning.
Know Your Credit Score
Prospective lenders will likely pay particular attention to your credit profile when reviewing your Iowa business loan application. They’ll probably scrutinize your personal credit scores: Traditional banks often require a credit score for a business loan in the range of 680 or higher. Other lenders, like online banks, may be willing to look at slightly lower scores.
Because of your scores’ importance, it’s smart to review your credit reports before you apply so that you can find any errors and have them fixed — and be sure you fully understand your financial situation before you submit your application for an Iowa small business loan.
Gather Your Key Documents
Presenting an application package that’s organized and complete can speed up the review process and demonstrate to a potential lender that you’re reliable and motivated. While requirements vary by lender, you should generally be ready to provide the following:
• Credit report
• Income statement
• Bank statements
• Budget
• Income tax returns (both business and personal)
• Business plan
• Collateral valuation and supporting documents (which may include titles, deeds, or invoices)
Compare Lenders and Loan Offers
When you’re in the market for an Iowa small business loan, shopping around can help you find the financing that’s best suited to your business’s needs. Different banks, for instance, may offer very different options on term loans. It can also be smart to compare options from multiple kinds of sources, including local credit unions, large national institutions, and online lenders.
As you evaluate financing proposals, you might want to use a business loan calculator to help you estimate the monthly payments for different options. It’s also a good idea to look closely at the Annual Percentage Rate (APR) of each loan to understand its true cost.
Submit Your Application and Await Approval
Once you’ve filled out the application form and organized your supporting documents, you’re ready to submit your application package. After your lender has it in hand, all you have to do is wait for a response. This can take as little as two days in some cases, but may take several weeks in others.
Tips for Improving Your Loan Approval Chances
You might be able to increase your chances of securing a loan by taking steps to strengthen your business’s financial profile before you apply. Lenders typically want to see evidence of your business’s stability as well as its ability to repay the loan. Presenting a financially strong profile may help with the underwriting process.
Here are some steps to think about trying:
• Be sure that you’ve got a realistic business plan with detailed financial projections.
• Work to strengthen your business and personal credit scores by paying down your current balances and making timely payments.
• If you have collateral available, consider offering it as security to potentially bolster your application’s chance for approval with certain Iowa business loans.
Other Funding Options for Iowa Small Businesses
If a traditional loan isn’t the right fit for your small business, there are other ways to fund it. Iowa’s entrepreneurial ecosystem offers several alternative paths to capital. One or more of these options may align better with your specific stage of growth or industry.
Small business grants are often highly sought-after options because you don’t have to repay them and there are a number specific to Iowa. Manufacturing 4.0 Technology Investment helps industrial firms invest in automation and smart technology to remain competitive. And the Main Street Iowa Open 4 Business Program awards grants to business development-related proposals. You can also try searching national databases like Grants.gov to find federal programs that may be relevant to your industry.
Crowdfunding may be another viable route, helping you to raise smaller amounts of capital from a broad base of supporters online.
Additional Business Resources in Iowa
Success in business often takes more than just capital; it also requires experienced guidance and a supportive community. Fortunately, Iowa has a robust network of resources designed to help small business owners navigate challenges. Most notably, the Iowa Small Business Development Center (SBDC) provides no-cost, confidential advising at 15 regional centers across the state.
For mentorship, local SCORE chapters connect entrepreneurs with experienced business leaders who volunteer their time. Additionally, the Iowa Center for Economic Success offers specialized education and micro-lending services. Getting engaged with your local Chamber of Commerce can also provide valuable networking opportunities.
The Takeaway
Securing an Iowa small business loan can be the decisive factor that allows your company to expand and flourish. While the process involves careful planning, finding funding is achievable for a focused entrepreneur. By defining your goals and utilizing the available resources, you should ultimately be able to find the right financing solution for your company.
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.
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FAQ
How do I get a small business loan in Iowa?
To apply for an Iowa business loan, start by clearly defining your funding needs and checking your credit scores. Then gather essential documents like your business plan, tax returns, and bank statements so that you can assemble and submit your application. Finally, compare options from various lenders to find the best terms available to you.
Can I get a startup business loan with no money?
This can be challenging, as most lenders require an owner’s investment. However, some SBA microloans that are designed for startups have lower capital requirements. Another option is to research business grants, which provide funding that doesn’t need to be repaid.
How hard is it to get a small business loan in Iowa?
The degree of difficulty depends on your business’s financial health, time in operation, and credit history. Traditional bank loans can have strict qualifications. Online lenders often offer more flexible requirements, making them a more accessible option for many Iowa businesses.
What is the easiest type of business loan to get approved for?
Loans secured by collateral, such as equipment financing loans, are generally easier to obtain because the asset lowers the lender’s risk. Short-term loans and invoice financing from online lenders also typically have less stringent requirements.
What credit score do I need for a small business loan?
Requirements vary, but for traditional bank and SBA loans, a personal credit score of 680 or higher is often preferred. Some online lenders may approve applicants with scores in the low 600s. Bear in mind that higher scores can result in better approval odds and lower interest rates.
What can I use an Iowa small business loan for?
You can use a small business loan for almost any legitimate business purpose. Common uses include purchasing inventory, buying equipment, funding marketing campaigns, or refinancing debt. However, you can’t use the loan for personal expenses.
Are there any small business grants available in Iowa?
Yes, grants are available in Iowa. For example, Manufacturing 4.0 Technology Investment helps industrial firms invest in smart technology and automation, while the Main Street Iowa Open 4 Business Program awards grants to business development-related proposals. You can also search national databases like Grants.gov for federal programs relevant to your industry.
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