Iowa is well-known as a business-friendly state, featuring low taxes, low cost of doing business, strong economic growth, and plenty of entrepreneurial opportunities. The Hawkeye State ranks high in most small business metrics, but its lowest ranking is access to capital (36th).
Fortunately, Iowa small business owners can still get the financing they need to fuel growth thanks to increased alternative lending options and state-backed programs. The various small business loan options each serve a different purpose. Choosing the best Iowa small business loan for your needs and cash flow is essential to ensuring success and avoiding business debt pitfalls.
This guide explores what you should know about business loans in Iowa, including the available options, pros and cons, and the application process. Specifically, we’ll answer these questions and more:
Iowans can access various business loan program options to fund their operations.
Working Capital Loans: Working capital loans in Iowa provide financing to cover a business’s day-to-day operational expenses. Typical uses of working capital loan funds include inventory purchases, payroll, rent, and other short-term financial needs. They provide the cash flow to keep operations running smoothly and seize economic opportunities. Working capital loans are typically easier to qualify for than most other types of business loans, making them a popular choice for small businesses needing quick funding.
Business Line of Credit: A business line of credit in Iowa is a flexible financing option that allows small businesses to access funds as needed. Instead of a lump sum payment, funds for a small business line of credit are activated as an available credit limit. A revolving line of credit works similarly to a credit card, where you can borrow and repay funds as needed and only pay interest on the amount you use. This type of financing is ideal for covering short-term expenses, managing cash flow fluctuations, or seizing growth opportunities without applying for a new loan each time.
Revenue-Based Financing: Revenue-based financing in Iowa is a form of alternative small business funding where the company’s revenue determines eligibility and amounts. Repayment comes directly from a percentage of future revenue. This type of financing program allows businesses to access capital without taking on additional debt, making it an attractive option for companies with fluctuating revenue streams.
SBA Loans: SBA loans provide funding to help businesses start, grow, and succeed. The Small Business Administration (SBA) partially guarantees these loans, providing security for lenders and allowing small businesses better access to capital. These partially guaranteed loans offer favorable terms such as lower interest rates and more extended repayment periods than conventional loans, making them an attractive option for an IA small business owner. An SBA loan in Iowa can be used for various purposes, including working capital and equipment purchases. SBA 504 loan programs fund commercial real estate and other major fixed assets.
Invoice Factoring: Invoice factoring in Iowa is an alternative business funding option in which a business sells its accounts receivable to a third party at a discount. This provides immediate cash flow, allowing the business to cover expenses or invest in growth without waiting for customers to pay their invoices. The factoring company then collects the total amount from the customers directly.
Merchant Cash Advance: A merchant cash advance (MCA) in Iowa is a form of financing where a business receives a lump sum of money upfront in exchange for a percentage of future credit card sales. Small businesses with fluctuating revenue streams or those needing quick access to capital typically use this type of funding. While merchant cash advances can provide fast funding, they often come with high fees and may not be suitable for all businesses.
Business Term Loan: Business term loans in Iowa are a type of financing in which a business borrows a lump sum and repays it with interest over a set period, with a fixed interest rate and consistent monthly loan payments. These loans are typically long-term financing, but there are also short-term business loans. Businesses usually use term loan proceeds for significant investments like equipment purchases, paying off existing business debt, commercial property purchases, or business expansion projects. The interest rates and terms of business term loans can vary depending on the lender and the borrower’s creditworthiness.
Equipment Financing: Equipment financing in Iowa is a type of small business loan specifically used to purchase equipment and machinery for operations. Equipment loans allow businesses to acquire necessary assets without draining their cash reserves. Typically, the financed equipment serves as collateral for the loan, making it easier for companies to secure funding.
Asset-Based Loans: Asset-based loans (ABL) in Iowa allow small businesses to unlock the value of the assets on their balance sheet to secure funding. ABL lenders have business assets appraised and then issue loan amounts based on the appraisal value. The assets become collateral for the loan, meaning the lender can claim the assets in case of default. Some examples of asset-based business loans include commercial real estate loans, certain construction loans, secured term loans, and accounts receivable financing.
Iowa offers many funding opportunities to help small business owners. The state wants to support economic growth and development through various programs. These financing options aim to assist businesses in different stages of their journey.
The Iowa Targeted Small Business Program offers small business loans to minorities, women, disabled veterans, and entrepreneurs with disabilities in Iowa. Eligible businesses must be for-profit, have an annual gross income of less than $4 million, and be majority-owned by a woman, minority, service-disabled veteran, or disabled person. Loans can be used for various business expenses, with favorable terms including low interest rates, fixed monthly payments, and up to five-year repayment terms.
The Iowa Linked Investments for Tomorrow (LIFT) program is a valuable resource for businesses looking to secure low-interest loans for equipment purchases or working capital. By connecting state investments with local banks, the program aims to stimulate job creation and foster economic growth within the community.
This initiative provides financial support to businesses and helps strengthen the local economy by encouraging entrepreneurship and innovation. Companies can leverage these funds to expand operations and contribute to Iowa’s prosperity.
The Iowa Innovation Acceleration Fund provides funding up to $250,000 to support new businesses with innovative ideas. This program promotes technology and innovation in Iowa, helping entrepreneurs bring their visions to life and creating job opportunities. By backing startups, Iowa establishes itself as a hub for technological advancements, fostering a vibrant business environment.
The Iowa Demonstration Fund focuses on projects that show new technologies or processes. It helps businesses test their ideas before full-scale production. Companies can receive funding of up to $100,000. This program encourages experimentation and innovation.
The Iowa Proof of Commercial Relevance Program helps businesses prove their product’s market potential. It provides funding for market research and feasibility studies. Businesses can access up to $50,000 to validate their concepts. This support is vital for reducing risks before launching a product.
The High Quality Jobs Program aims to attract and retain jobs in the state. It offers financial incentives for companies creating high-paying jobs. Businesses may qualify for tax benefits and grants based on job creation numbers. This program strengthens Iowa’s workforce.
The SSBCI provides additional funding sources for small businesses in Iowa. It enhances access to credit through loan guarantees and investments. This initiative aims to increase lending to underserved markets. Small business owners benefit from improved financing options.
The Iowa Center Loan Fund provides financing options for small businesses in Iowa, offering flexible terms and competitive rates to support growth and development. Focusing on empowering entrepreneurs, the fund assists in accessing capital for startups and existing businesses, fostering economic vitality across the state. The Iowa Center Loan Fund is crucial in driving innovation and job creation within local communities through strategic partnerships and tailored financial solutions.
| LOAN TYPES | MAX AMOUNTS | RATES | SPEED |
|---|---|---|---|
| Merchant Cash Advances | $7.5k – $1m | Starting at 1-6% p/mo | 1-2 business days |
| SBA Loan | $50k-$10m | Starting at Prime + 2.75% | 8-12 weeks |
| Business Term Loan | $10k to $5m | Starting at 1-4% p/mo | 1-3 business days |
| Business Line of Credit | $1k to $250k | Starting at 1% p/mo | 1-3 business days |
| Receivables/Invoice Financing | $10k-$10m | Starting at 1% p/mo | 1-2 weeks |
| Equipment Financing | Up to $5m per piece | Starting at 3.5% (SBA) | 3-10+ business days |
| Revenue Based Business Loans | $10K – $5m | Starting at 1-6% p/mo | 1-2 business days |
Iowa has a strong and diverse economy. The state is known for its agriculture, manufacturing, and services, which contribute significantly to its growth. Business loans in Iowa often support these key industries. Understanding the main sectors helps potential borrowers find the right financial help.
Here are some of the most prominent industries in Iowa:
This is the backbone of Iowa’s economy. The state produces corn, soybeans, and livestock. Iowa is one of the top producers of these crops in the nation. Many farms rely on business loans to expand operations or purchase new equipment.
This sector includes food processing, machinery, and electronics. Manufacturing accounts for a large portion of jobs in Iowa. Companies often seek loans to invest in technology and improve production efficiency.
Iowa leads in wind energy production. The state generates a significant amount of its electricity from wind turbines. Investments in renewable energy projects often require funding through loans.
This industry is growing rapidly due to an aging population. Hospitals, clinics, and health services are expanding to meet demand. Many healthcare providers look for loans to upgrade facilities or purchase medical equipment.
Financial services are crucial to Iowa’s economy. Banks and insurance companies provide essential services to businesses and individuals. These institutions often use loans to enhance their operations and customer service.
The tech industry is emerging in Iowa, focusing on software development and IT services. Startups are popping up in cities like Des Moines and Cedar Rapids. Entrepreneurs frequently seek business loans to launch their ideas or expand their businesses.
Small business loans in Iowa offer numerous benefits for entrepreneurs looking to grow their businesses. One advantage is the variety of loan options available, such as traditional term loans, SBA loans, and lines of credit, allowing businesses to choose the best fit for their needs.
Additionally, Iowa business loans often come with competitive interest rates, making them an affordable financing option for small businesses. Another benefit is that successfully repaying these loans can help build a positive business credit history, which can open up access to more funding opportunities in the future.
Furthermore, obtaining a business loan in Iowa can also provide networking opportunities with lenders and other local business owners, creating potential partnerships and collaborations.
Small business loans in Iowa have several disadvantages. First, the cost of debt can be high, with interest rates and fees adding up over time, increasing the overall amount owed.
Traditional lenders may have challenging approval requirements, making it difficult for small businesses to qualify for loans. Additionally, collateral requirements can put business assets at risk if the loan is not repaid, potentially leading to the loss of valuable property.
Personal guarantee requirements also pose a risk, as they put personal assets at stake if the business cannot repay the loan. Finally, there is a risk of default, damaging the business’s credit score and making it harder to secure future financing.
The loan application process and required paperwork depend on your chosen Iowa business loan. Funds can be approved and distributed for most products within three business days.
Here’s how to apply:
The first step is choosing the most sensible solution to the problem at hand. This should require a decent amount of research, as each product is designed for different types of expenses and cash flow cycles. Are you looking to cover a short-term or long-term cost? Is demand expected to increase or decrease in the coming months?
Considering the funds’ purpose will also help us determine the correct borrowing and terms for your needs.
Here are the documents and additional information required for all Iowa business loans:
SBA Loan options require additional documents and information, such as business tax returns and a business plan. Visit our SBA Loan page for further information and learn what’s needed for the application.
You can begin the application process by calling us or filling out our one-page online application. Either way, you’ll be asked to enter the information from the previous section along with your desired funding amount.
Once you apply, a representative will contact you to explain the repayment structure, rates, and terms of your available options. This way, you won’t have to worry about any surprises or hidden fees during repayment.
If and when you’re approved, funds for Business Term Loans, Business Lines of Credit, Working Capital Loans, Equipment Financing, Merchant Cash Advance, Revenue-Based Business Loans, and Accounts Receivable Factoring should then appear in your business bank account in anywhere from 24 hours to one week. For SBA Loans, it usually takes 3-5 weeks (or more in some cases) to receive funding.
Your Iowa business loan isn’t just a way to get financing for your business. It’s also an excellent opportunity to start building (or improving) your credit.
Regardless of the type of business loan you get, make all your required payments on time and in full. If you get a business credit line or another form of revolving credit, keep your loan balance below the credit limit.
Consistently making your business financing payments on time and in full will positively impact your credit. And that means preferred rates and terms when you next need business financing.
If your application is declined, you might have applied for the wrong product for your cash flow. In this case, we would likely recommend a different product with a less hazardous repayment structure.
Your loan application might also be declined after it is determined that you cannot afford to take on more debt. Instead, your needs and financial circumstances might be better suited for another financing tool, like a business credit card or even a personal loan. Both options can be accessed through the UCS site and are usually much more accessible to qualify for than business loans.
If your credit score is preventing you from accessing financing, you should consider credit repair services. We can help you identify the issues that keep your score down and develop practical solutions for eliminating them.
Iowa small business owners have several lender options to consider.
Many business owners in Iowa turn to traditional lenders like banks and credit unions. These institutions often provide low interest rates on business loans. However, qualifying can be difficult. They typically require excellent credit scores and several years of operation. Many also look for high annual revenue and consistent cash flow. Collateral is often needed, too.
Large national banks have more extensive credit facilities. However, they focus more on commercial enterprises than small businesses, which can make them less personal. Local lenders, like regional banks and credit unions, offer more flexibility. They understand the local market better and may have tailored options for small businesses.
Alternative lenders have changed the world of small business lending. These lenders offer convenient online applications, and their qualifications are much easier to meet than traditional lenders. Many business owners enjoy quick approvals and fast funding times.
However, alternative lenders usually charge higher interest rates. Despite this cost, many find the ease of access worth it. Speedy funding can be crucial for businesses needing immediate cash flow.
Small Business Loan Marketplaces (like UCS) are game changers for Iowa business owners. These platforms allow businesses to apply to a network of lenders with one simple online application. This process saves time and reduces stress.
Once approved, businesses receive multiple funding offers. They can then choose what best fits their needs and cash flow situation. Some marketplaces even use a concierge approach. This connects applicants with lending experts who help guide them through the process.
Community Development Financial Institutions (CDFIs) are essential in Iowa’s financing landscape. They focus on providing loans to underserved communities and small businesses. CDFIs often offer lower interest rates and flexible terms.
These institutions aim to support local economies. They help businesses that may struggle to get financing from traditional sources. CDFIs create opportunities for growth and development in the community.
Iowa aims to assist small business owners through various programs. These initiatives provide support in different forms, including loans and grants. They help entrepreneurs grow their businesses and create jobs.
The Iowa Business Growth program offers small business loan programs to eligible companies. This program focuses on helping businesses expand and improve their operations. It provides financial assistance for purchasing equipment or real estate, and business owners can access funds that may not be available through traditional lenders.
This program is designed to stimulate economic growth in the state. It supports startups and existing businesses looking to scale up. The application process is straightforward, making it easier for entrepreneurs to get their needed help.
The Iowa Center for Economic Success also plays a crucial role in supporting small businesses. This center provides resources and guidance for entrepreneurs at all stages of business development. They offer training sessions, workshops, and one-on-one consulting.
These services help business owners understand their options. The center connects them with the right small business loan program or other funding sources. Entrepreneurs can gain valuable insights into how to manage their finances effectively.
The Iowa Economic Development Authority (IEDA) offers various assistance to small businesses. Their programs include grants, tax incentives, and low-interest loans. IEDA focuses on fostering economic growth across the state.
Business owners can apply for support from the State Small Business Credit Initiative. This initiative helps startups secure financing that promotes job creation. Businesses can thrive and contribute to the local economy by utilizing these resources.
SBA Regional Offices in Iowa provide additional support for small business owners. They offer SBA disaster assistance programs for those affected by natural disasters. This assistance can be crucial for businesses trying to recover from unexpected events.
SBA services also include counseling and training programs. These resources help entrepreneurs develop their skills and grow their businesses. Local offices work closely with business owners to understand their needs and provide tailored solutions.
Iowa offers various business grants to support local entrepreneurs. These grants help businesses grow and create jobs. They cover different industries and needs. Here are some small business grants available in Iowa:
Iowa offers several tax credits to support small businesses. These credits help reduce the overall tax burden. They encourage growth and investment in the state. Here’s a list of some key tax credits available for small businesses in Iowa.
A low credit score limits financing options, but credit-challenged Iowa small business owners can obtain financing with bad credit business loans. These specialized financing options focus on a business’s cash flow and growth potential more than the personal credit score of the business owner(s), increasing your chances of credit and lender approval.
Several alternative lenders specialize in providing business financing for credit-challenged entrepreneurs. Online lenders offer easy online applications with minimal documentation, quick decisions, and fast funding, which benefits small businesses with urgent capital needs.
However, business loans for bad credit often carry high interest rates and increased fees. In addition, you may receive a lower maximum loan amount, have shorter repayment terms, and require more frequent repayment. These conditions can lead to further financial strain if not properly managed. Ensure you have a plan and budget before agreeing to a bad credit business loan.
A popular strategy for IA business owners is to use a bad credit business loan as short-term financing until their credit improves. With a better credit score, entrepreneurs can potentially access lower-cost, long-term loans and pay off bad credit business loan debt.
Business loans in Iowa can provide the necessary funding to bring your dreams to reality, but understanding the available options and how they work is crucial. Iowa business owners have many lenders and loan options to consider.
Getting the right loan for your goals can help set you up for success. Compare options and shop various offers to find the best deal for your Iowa small business.
Contact us if you’re ready to start your small business loan journey. Our alternative financing experts can help you find the best small business loan to fuel growth in The Hawkeye State.
Fraud Disclosure:
Please be aware that individuals have been fraudulently misrepresenting to business owners (and others) that United Capital Source, Inc. (“UCS”) can assist small businesses in receiving government grants and other forgivable business loans, when in fact those grants or loans do not exist or are not available. These individuals have ulterior motives and are engaging in the unauthorized use of the names, trademarks, domain names, and logos of UCS in an attempt to commit fraud upon unsuspecting small business owners.
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