The Best Business Loan & Financing Resources For Iowa Small Businesses
Iowa businesses enjoy some of the lowest costs of doing business in the country, but even those lower costs can sneak up on even the most prepared enterprise. When that happens, you’ll want to know where you can look to find financing.
Below, we’ll look at some of the financial options available to Midwestern entrepreneurs and how they can go about accessing them.
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The Best Online Business Lenders For Iowa Businesses
Iowa is a big, mostly rural state, which means you can rack up quite a bit of mileage going to bank branches to fill out paperwork, especially if you’re determined to get the best deal.
There’s another option, one that comes with its own pros and cons: work with an online lender.
Online lenders are accessible from just about anywhere, regardless of whether you’re in downtown Cedar Rapids, or in the middle of a cornfield.
While the rates offered by online lenders are usually higher, they have more flexible lending standards, shorter application processes. There are a huge number of them, however, so sorting through them can be a bit of a chore.
Here are a few recommendations to get you started.
Businesses with fair or better credit looking for a traditional installment loan should keep Prosper in mind. These are relatively small loans, capped at $40,000, but with competitive rates and longer repayment terms, they’re a pretty good deal for businesses that need a modest cash infusion.
If your credit rating is keeping you from getting approved, but you still need a moderate amount of money, Credibly may be able to accommodate you. Their rates a bit higher than some of the other options, but there’s enough breadth in their product line-up to make them useful to many businesses struggling to get traditional funding.
If you’re just starting out, you may run into a problem: business lenders usually require that you’ve been in business for a minimum amount of time before they’ll lend to you.
Fundbox is a notable exception. Instead, you simply have to have been using a compatible accounting and invoicing software for at least two months. Better yet, they don’t have any hard credit requirements. You will need to demonstrate that you’re on track to earn at least $50K/year in revenue, however.
Fundbox offers lines of credit and invoice factoring.
Lendio is a great way to save yourself time, especially if you’ve never worked with an online lender before. Instead of directly originating your loan, Lendio will shop your application around to its network of lenders and return with any offers you receive. While it’s not clear whether using Lendio will affect the rate offered to you by your eventual lender, Lendio does not charge applicants any fees themselves.
Amex Merchant Financing
Established companies are also getting into the online lending game, including American Express.
If your business accepts American Express cards at point of sale, you can take advantage of Amex’s Merchant Financing program. These are short-term loans with flat fees, meaning they’re paid back quickly and don’t accumulate interest in the traditional sense. Instead, Amex will quote you a flat fee (which is usually the amount you borrow plus a percentage of that amount).
Term lengths are available in 6, 12, or 24-month versions, with early payoff incentives.
Iowa Banks & Credit Unions
As convenient and fast as online lenders can be, if you want to find the best rates on business loans, you’ll probably still have to deal with a traditional lender. This usually means finding a branch and applying in person, with a longer and more intensive application process. Traditional lenders also tend to be more conservative with their lending standards, so you’ll want to at least have good credit prior to applying.
There are advantages to seeking loans through the bank or credit union services your business accounts as they’ll already have your bank records on hand, as well as a sense of your reliability as a customer.
Big banks operating in Iowa include:
Bank Of America
Bank of America has branches in Iowa’s larger cities, making them fairly accessible to most of the state if you want access to (potentially), some of the best business lending rates in the country.
|Line of credit borrower requirements:
• Must have been in business at least 2 years.
• Must have a personal credit score of 670 or above.
• Must have revenue > $200,000 for unsecured products, or greater than $250,00 for secured products.
|Read our Bank of America review|
Wells Fargo been making headlines for the wrong reasons as of late, but they maintain a reputation as being one of the most small business-friendly lenders among the big national bank. They also have a more modern, straightforward application process than many of their competitors.
• Must have $1.50 in cash flow for every dollar borrowed.
• Must have a personal credit score of 640 or above.
|Read our Wells Fargo review|
Outside of the East Coast and especially west of the Mississippi, US Bank is a huge player in the business lending market. They also have a reputation for being a bit more approachable than your average large bank.
• Must be located in a state served by U.S. Bank
• Must have been in business for two years
|Read our U.S. Bank review|
Some borrowers may prefer to not deal with for-profit lenders at all and instead work with a credit union. Credit unions are chartered to return value to their members, so the best credit unions may offer rates better than what you’d find at a comparable bank. Not all credit unions offer business loans, however, so you may have to settle for personal loans if you go this route.
Some of the more accessible credit unions in Iowa include:
- Marine Credit Union
- Cobalt Credit Union
- Veridian Credit Union
- Dupaco Community Credit Union
- University of Iowa Community Credit Union
Small Business Grants In Iowa
Not all forms of business financing involve going into debt. Grants are cash awards given to businesses who fulfill specific criteria. Grants are highly competitive, as you’d expect “free” money to be, so be prepared to put some time into pursuing grants if you choose to take this path.
For some general advice on where to seek them, check out our grant feature.
Some state-specific grants to check out include those from:
- Iowa Self Employment Program: A self-employment program for disabled individuals, with awards up to $10,000.
- IowaGrants.gov: The site may look like it’s from the 00s, but it’s a great up-to-date list of grants being offered with the state.
- Demonstration Fund: Awards of up to $100,000 for Iowa businesses with high growth potential.
- Proof of Commercial Relevance: Awards up to $25,000 to businesses developing new technologies and have a proof of concept.
Resources For Startups In Iowa
Iowa has a well-developed infrastructure for supporting and nurturing new businesses. If you’re just starting out or ready to take that next step in growing your business, there are a number of agencies and programs that can help you.
Some resources to look at include:
- Targeted Small Business Program: The TSB is a program designed to help women, minorities, veterans, and disabled individuals access capital. They offer microloans up to $50,000.
- LIFT Program: Offered through the Treasure of the State of Iowa, this program lets businesses apply at a local lending institution for loans (up to $200,000). The financial institution then passes the application on to the Treasurer. If approved, the state purchases a CD with the lender, who then makes the loan to you.
- High Quality Jobs Program: A program that provides tax credits and other forms of assistance to businesses relocating to Iowa or expanding within it.
- Iowa Economic Development Authority: State agency supporting business and community development within the State of Iowa. A good central resource for finding specific programs and organizations that can help your company.
What To Consider When Choosing A Lender
Remember that a loan is a product that you are buying, not charity. And like any other product, you have to evaluate it to make sure it fits your needs and goals. Weeding out lenders who aren’t going to give you a deal that will work for you is important.
How can you go about this? Here are some factors to consider:
- Your Industry: Some lenders specialize in lending to specific industries. Others can’t or won’t lend to certain industries. If they can’t write you a loan, cross them off your list.
- Borrowing Amount: If you need $5,000, you’ll be looking at different lenders than if you need $5 million. Choose the right tool for the job.
- Rates & Fees: How much is it going to cost you? Are the lender’s rates in line with the industry standard? Do they tell you what additional fees they charge, or do they hide them?
- Time To Funding: Do you need the money right away or next quarter? Choose a lender that can work with your timetable.
- Term Lengths: You’ll want to know how quickly you have to pay the money you’re borrowing back. Make sure you can afford the loan over the long-term.
- The Type Of Expense Being Financed: Some financial products are limited in what they can be used for. Do you need a lump sum of cash? Or do you need a line of credit that you can draw upon periodically?
- Collateral: Secured loans and lines of credit require some form of collateral, usually in the form of an asset, real estate, or cash deposit. If you don’t have collateral to put it, you’ll want to look at unsecured loans.
Whether you’re starting or growing a business in Iowa, or looking to relocate to the Hawkeye State for the high quality of life and low cost of doing business, you should be able to find great sources of financing.
Just starting out? Check out our resources for startups.