Navigating the labyrinth of small business financing in Missouri can often feel overwhelming, but in this article, we will go through one source of funding which is government small business loans. Created to foster economic development, these financial resources are designed to propel small businesses towards success, offering the necessary boost to overcome financial obstacles and achieve their objectives.

Also see: 10 tips for getting a small business loan

Demystifying Government Small Business Loans

Contrary to popular belief, the federal government isn’t typically handing out cash to small businesses. Instead, they offer government small business loans – a unique form of assistance that provides an approved lender, such as a credit union or commercial lender, a guarantee to back the loan. The benefit here is the reduced risk for lenders, which in turn makes it easier for small businesses, like yours, to secure the financing they need.

Traditional lenders view small businesses, especially startups, as high-risk borrowers due to a lack of collateral or established credit. However, government-backed loans are specifically designed to support these businesses, even when they don’t meet traditional lending standards. Don’t be fooled, though; it doesn’t mean every business can get a slice of this financial pie. A feasible business idea, a strong business plan, and the owner’s credit history are key ingredients.

Unraveling the Types of Government Loans

Diversity is the spice of life, and this holds true for small business financing options too. We’ll delve into some of the more popular ones: the SBA 7(a), SBA 504 loan, SBA microloans, and the USDA B&I program.

SBA 7(a) Loan

The 7(a) loan program is the Small Business Administration’s (SBA) leading actor in the realm of small business loans. It’s particularly advantageous when a business purchase includes real estate, but it’s versatile and can be used for various other purposes, such as working capital, refinancing existing business debt, purchasing and installing machinery, equipment, furniture, and more.

To qualify, your business must operate for profit, meet the SBA’s criteria of a small business, and have sound financial resources. Most importantly, the business owner should be able to demonstrate a reasonable ability to repay the loan. With the SBA 7(a) loan program, your small business has the potential to secure up to $5 million.

SBA 504 Loan

The SBA 504 loan program, managed by Certified Development Companies (CDCs), is designed to stimulate business growth and job creation. It provides long-term, fixed-rate financing for major fixed assets like real estate and equipment. You could be eligible for up to $5.5 million with this program, provided your business meets the SBA’s specific eligibility requirements.

SBA Microloans

For small businesses requiring small, short-term loans, SBA microloans are the go-to option. Offered through intermediary lenders, these loans cater to small business owners who require financial resources up to $50,000. While these loans do require some form of collateral and a personal guarantee, they often come with the added benefit of business counseling and training.

USDA B&I Loan

The United States Department of Agriculture (USDA) Business & Industry (B&I) Loan Program is a more niche option, providing loan guarantees to assist rural businesses. If your business operates in a rural area, this program can offer substantial financial assistance to bolster your business activities.

How does a small business in Missouri get an SBA loan?

Final Thoughts

While the process to secure these loans involves some navigation, the potential rewards make these financing options worth exploring for any small business owner. Despite the additional paperwork and potentially higher costs, government-backed loans can be a lifeline for businesses that might not qualify for traditional business financing.

Remember, obtaining an SBA loan is a significant step for your business. Take your time, do your research, and don’t hesitate to seek help from professionals or the SBA’s resources, including their Small Business Development Centers (SBDCs) throughout Missouri. You’ve got this!

To help you navigate the process of doing a Missouri UCC search, I’ll provide you with information regarding the steps on how to search the Secretary of State’s database. 

What is a UCC?

A UCC, or Uniform Commercial Code, is a set of uniform laws governing commercial transactions as defined by the National Conference of Commissioners on Uniform State Laws. It was officially adopted in 1952 to provide consistency and clarity between different states with regard to contracts, sales, and negotiable instruments. The UCC is broken down into nine articles covering various topics, such as sales and leases, negotiable instruments, secured transactions, bulk transfers, and more. 

In Missouri, all UCC filings are maintained by the Office of the Secretary of State’s Uniform Commercial Code Division. By conducting a UCC search (officially called a UCC-1) in Missouri, an individual or business can determine who owns specific assets and if it’s encumbered by liens. This information is important for lenders, especially when evaluating the collateral being secured when requesting a business loan. 

Where are UCC liens filed in Missouri?

With the exception of real estate liens and land records, All UCC filings in the state of Missouri are filed with the Missouri Secretary of State. Real estate records are filed with the County Recorder of Deeds in the county where the property is located

What information does a UCC search show?

A UCC search in Missouri will reveal any existing liens or the creditor’s interest against an individual or business’s property. This can include mortgages, security agreements, conditional sale contracts and more. 

A UCC lien search will also show the name of the secured party, debtor name, description of the collateral and more.  

Steps to Search the Missouri UCC Database

Step 1 –Go to the Secretary of State’s Website

To get started, go to the Missouri Secretary of State’s website. If you haven’t created an account, get set up.

Step 2 – Enter Search Information

Next, click on File/Search and enter the first and last name of the individual debtor or the name of the organization debtor if you are searching for a company. 

Step 3 – Review the Search Results

Once the debtor information is added, click the Search button.

If the debtor that you are searching for comes back with a match, you can view the report to get more details or order a copy of the document.

Are you looking to secure a business loan and not sure what paperwork you need?

Choosing the right business lender and understanding the process can be complicated, but it doesn’t have to be. Whether you are looking for a Small Business Administration (SBA) guaranteed loan or a line of credit, I’ll provide you with a checklist of commonly requested items required for any small business loan application.  

Also see: 10 tips for getting a business loan

1. Business Plan
   The business plan provides the lender with an overview of your company’s operations and goals, as well as a detailed financial analysis of your business. This document gives lenders insight into how you plan to use the funds they are providing and how you intend to use them to grow your business. It is important to provide a thorough and accurate business plan to give lenders the confidence that you are capable of managing their funds responsibly. 
2. Collateral Documentation
   Lenders typically require a list of collateral when applying for a loan. Collateral is an asset that a borrower pledges in order to secure a loan and can include cash, real estate, cars, or other personal property. Having collateral provides the lender with some assurance that if the borrower defaults on their loan payments, they will be able to recoup some or all of their losses. 
   
   Also see: How to do a Missouri UCC Search
3. Borrower Information Form
   A borrower information form is a document that lenders require from all borrowers. This form is designed to provide the lender with an overall picture of your business, its financial situation and the ownership structure. The form typically includes questions about your personal background as well as your business’s financial status, such as current income and expenses. It also requires you to provide information about the nature of your business and how you plan to use the loan proceeds.
4. Legal Formation Documents
   Formation paperwork will be needed to prove the existence of the business. This will include the Articles of Organization for an LLC or the Articles of Incorporation for a corporation. For partnerships or sole proprietorships, the DBA (Doing Business As) registration will be needed.
5. FEIN & Social Security Number
   The banks will need the business’s Federal Employer Identification Number (FEIN) and the owner’s social security numbers. 
6. Personal Financial Statement
   A Personal Financial Statement is a document that lenders require from all borrowers and you have likely seen one if you applied for a car or home loan. This form provides the lender with detailed information about your financial health and personal background. It includes questions such as current income, expenses, assets, liabilities, credit history, and other pertinent financial information.  
7. Business Financial Statements
   Business Financial Statements are documents that lenders require from all borrowers. These forms provide the lender with detailed information about your business’s financial health and performance. The most commonly requested forms include an income statement or profit and loss statement, balance sheet, and cash flow statement.
8. Two Years of Business and Personal Income Tax Returns
   In addition to the financial documents of the business, the bank will also want to see the last two years of tax returns for both the business owner(s) personally and the business. If you haven’t filed for one or both, these are going to be required before the bank can move forward with any loan.
9. Personal Credit Score
   While not something that the bank requests, but is critical to know about before requesting a loan is the credit score of the borrowers. Having a poor credit score will impact the interest rate of the loan, or in more difficult situations, will result in the immediate denial of the loan. 
10. Business Bank Statements
    A lender will often request to see past business bank statements (and sometimes personal bank statements) to verify the income that was claimed was actually received. In some cases, they only ask for the last 90 days, while at other times, they will look for the last year.
11. Business Licenses or Certificates
    Depending on the type of business you are operating and where it is located, there may be various licenses or permits that you need to obtain prior to applying for a small business loan in order to prove the business is legal to operate. Generally, these licenses or permits include state and local occupational taxes, certificate of good standing, building permits, health department permits, and any regulatory board licenses.
12. Loan Application History
    A Loan Application History is a document that lenders use to assess a borrower’s creditworthiness. The document includes information such as the types of loans you have taken out in the past and any missed payments or defaults on those loans. This allows lenders to see if you are a reliable borrower and whether or not they should approve your loan request. 
13. Owner’s Resumes
    Most lenders require owners’ resumes when applying for a small business loan. This is to provide an overview of the small business owner’s business experience and the background of each individual owner to verify that they have the qualifications needed to run the business. It is important to include detailed information about each owner’s educational background, work experience, and any current or past business ownership in order to give a lender an accurate picture of the management team. 
14. Business Lease
    If the business operates in a leased space, the lender will want to know if the business is at risk of losing their lease. Obviously, losing their location could negatively impact their continued earnings. 

Applying for a business loan, especially an SBA loan, can be a long and complicated process, but if you follow this checklist you will be well on your way to getting the information the bank is going to ask for and the funding you need. Be sure to shop around for the best rates, prepare all of your documentation in advance, and have a clear plan for how you will use the loan proceeds. With careful preparation and some due diligence, you can get the business loan you need to grow your company.

The U.S. Small Business Administration (SBA) provides low-interest loans to small businesses and Private Nonprofits, homeowners, and renters located in regions affected by declared disasters who suffered substantial economic injury as a result of a natural disaster. SBA Disaster Loans help businesses meet working capital needs created by an unexpected event such as a natural disaster declaration. In order for small business owners to receive the low-interest loans, they must first apply with their local SBA office and have that application approved before applying for a loan from the SBA.

Also see: Disaster resource guide for Missouri small businesses

The most at-risk small businesses that are often unable to access traditional lending resources depend on the SBA small business disaster loans to help them through this crisis and repair damaged property and reopen again. This gives small businesses the financial flexibility they need to reopen their doors, get back on their feet and begin generating income.

The SBA small business disaster loans are tailored to meet the needs of small businesses of all sizes. The loans are intended to provide for working capital, inventory and equipment replacement, and construction that is essential for the reopening or continued operation of a small business that was directly affected by an eligible disaster.

Most recently, the SBA disaster loan program expanded to include the Economic Injury Disaster Loan (EIDL) due to a temporary loss of revenue from Covid-19. Funding was available with both grants and loans for up to $2,000,000. Another program from SBA helping small businesses was the Paycheck Protection Program (PPP) which provided a forgivable loan to employers who kept their employees on the payroll. 

To apply for small business disaster assistance, small businesses affected by the disasters, as well as small businesses located in designated areas that were forced to close due to an on-going disaster, can file an electronic loan application at www.disasterloan.sba.gov/ela.  For small businesses unable to file electronically, there are alternative methods available.  If small business owners wish, they can contact the SBA directly to request an application via mail or fax at 1-800-659-2955 or 202-205-6734.  Once filed, small businesses will receive a loan decision within 48 hours and be able to access the money within approximately five days.

In addition to SBA assistance, individuals may also look into the FEMA Individual Assistance Program which provides financial support for the repair of personal property, lodging, meals, clothing, and other expenses incurred as a result of an evacuation order or during a displacement from one’s primary residence due to damage caused by the disaster.  

Small business owners know that the business loan process can be stressful. Whether you’re applying for a business startup loan or business expansion loan, there is a lot of paperwork and documentation involved to get approval. In business, time is money, so you want to get things done as fast. 

Still, it can be done.

Here are ten ways to improve your chances to help you do just that.

Use your network. To get business loan advice, business owners should start by asking business owners they know. Find out which banks are business-friendly and which ones to stay away from. Your network may also be able to provide a warm introduction to a commercial lender, which will help. 

Bankers network extensively and are more likely to trust referrals from good customers. 

Find a bank familiar with your industry.  Banks specializing in business loans have a better understanding of the business challenges you face. These banks typically offer business loan advice and package their products

Some banks lend on a conventional basis (lending money without government support), while some banks participate in government programs (in the form of SBA loan guarantees and other loans).

Know your business. The better you understand the business, legal structure, and business model, the more likely you are to secure business credit.

Submit all required documentation to the business banker.  Have one ready if the business needs a business plan to secure business funding. Have the business plan, personal financial statement, tax returns, bank statements, and business loan application filled out neatly and be ready to go.

Also see: Small business loan checklist

Brush up on loan terminology. Knowing what you’re asking for and the types of loans offered by banks can’t hurt. A brief rundown of important terms includes:

• Term loans.  These business loans generally require fixed monthly payments over a specific time frame (e.g., 5, 7, or 10 years). At the end of the term, business owners can roll the business loan into a new business loan or pay the remaining balance in cash.
• Interest rates.  The percentage of the cost of borrowing loan principal that the lender charges to the borrower. Expressed as annual percentage rate (APR). 
• Cash flow. The amount of cash left after paying operational expenses and the new loan repayment.  
• Lines of credit.  Business lines of credit are revolving business loans that allow business owners to withdraw money up to a certain amount whenever needed. They’re advantageous because business owners can borrow money as they need and pay it back when business is good again. Lines of credit are commonly used for inventory and short-term cash needs. 
• Collateral. Business and personal assets are used to secure a loan. Banks will hold a lien on the collateral to help make sure they will be paid back.
• Commercial real estate mortgage.   Commercial real estate business loans are used to purchase or refinance business property. 
• SBA guaranteed loans.   There are different types of loans, but the SBA loan program is one of the more popular financing options. This type of loan comes through a commercial lender, but it is backed by the federal government’s Small Business Administration (SBA). These typically require a lower down payment than what would normally be required from a bank.
  
  Also see: Breaking down government small business loan programs
• Personal Guarantee. A signed document from an individual stating they are personally responsible for the business loan. In most cases, anyone owning 20% or more of the business will be required by the bank to sign a personal guarantee. 
• Commercial vehicle loans.   Vehicle business loans are business loans used to purchase business vehicles, including vans and trucks.
• Traditional bank loan.   A business loan that is not a business line of credit, business mortgage, or SBA-guaranteed business loan. A conventional loan is made by the lender in-house. 
• Equipment business loans.  These business loans are business lines of credit, business mortgages, or business vehicle loans where the funding is used to purchase business equipment.
• Talk to your banker and let them explain the various loan products for small businesses. Assess which products are right for you and are more likely to be approved. Be aware that banks often require proof that you can repay the loan, including collateral requirements or assets deposited in that bank.

Keep business and personal accounts separate. Business and personal financial activities should be kept separate so a lender can analyze the cash inflows and outflows of the business.

Review your credit report.   Business credit cards, business bank accounts, and business lines of credit should be in good standing.  Before requesting a loan, be sure to review your personal credit score and credit history to resolve any issues. 

FICO scores range from 300 to 850. It’s challenging for a business with a score of less than 600 to secure business credit from a financial institution.

Practice ansering the tough questions. Lenders will ask several questions to assess your knowledge in the business. There will likely be some “suggestions” on how to do things. Some will have warrant, others not, but take some notes and revisit later to see if they may help your business. 

Practice answering questions regarding your investment and collateral to secure the project, how much is being borrowed, expected repayment terms, and how the funding will be used, and more. 

Dress professionally.   Banks are business institutions and business owners should dress the part. Not that you have to go in with a three-piece suit, but don’t go in too casual either. 

Be confident.    Going through the loan application process will make even the most experienced business owners a little anxious. If you know your business and practice answering the questions, you will be ready to meet with the bank.

A financial projection is a forecast of future inflows and outflows for a business. They are used to plan the finances of everything from personal budgets to large corporations. In order to create accurate projections, it is important to make reasonable assumptions about future sales, expenses, and other key factors.

Accountants or other financial experts can create financial projections, but there is no reason why you can’t prepare your own projection models for your budgeting needs.

Why Do I Need Financial Projections?

Financial projections are often used in a business plan to support the feasibility of a new business or expand an existing business. A bank or investor will require the projections to evaluate the expectation that the business owner can pay the loan back or to make a return on their investment. 

Financial projections are needed to identify the potential impact of economic changes on the balance sheet, income statement, and cash flow statement. The results can help you monitor balance sheet health, track profitability over time, and develop a strategy for managing your finances better. A company can use historical financial statements to build a model looking into the future. 

If you own a business or expect to start one soon, creating financial projections is essential in taking charge of your financial future.

How to Create a Financial Projection Model

There are many different spreadsheets and accounting software programs that can be used to create financial projections, and most of these programs have pre-made templates that you can use. If you’re not comfortable using one of these programs, you can always create a spreadsheet in Microsoft Excel or Google Sheets. 

When creating a projection model, you will need to input historical data from the business’s past performance and future key assumptions. The historical data should include the past three years of balance sheets, income statements, and cash flow statements. The future assumptions should consist of projected sales, costs, and other financial factors. 

Once you have entered all the data, you can use the built-in formulas to calculate balance sheets, income statements, cash flow statements, and balance sheet changes over time. 

Most financial projections look at a three-year time period, though a five-year forecast may be needed for some longer-term projects. 

What’s Included in the Financial Projections?

The financial projections will include the projected income and operating expenses from the company’s operations. 

For income, you will want to include the cash sales projections by month, accounts receivable sales, and any non-business income such as interest.  When creating the sales projections, the assumptions used to get to the figure should be shown, so the person reading the plan can understand where the numbers came from. For example, a restaurant could estimate revenues by estimating the expected number of customers per lunch and dinner, then multiply these with the average check per meal to arrive at weekly or monthly projected sales figures.

When estimating expenses, categorize them into one-time start-up expenses (e.g., pre-opening advertising expenses, incorporation fees) and regular monthly operating expenses such as wages, payroll taxes, advertising, rent, utilities, etc.

Ultimately, financial projections end up with multiple statements – the income statement, cash flow statement, and balance sheet. 

The income statement shows how much money (or loss) was made in a specific period. The balance sheet changes throughout the projection are calculated by subtracting the beginning balance from the ending balance. 

The cash flow statement shows where money is coming from and going to, along with any other sources or uses of cash during the analyzed period. It can also indicate whether there are positive or negative cash flows beyond the balance sheet. 

The balance sheet formula is calculated by taking beginning balance plus ending balance minus any closing entries for the year. The income statement is usually produced on an annual basis. Cash flow statements are often generated monthly or quarterly. 

Last, the balance sheet provides information about the current state of the company’s assets, liabilities, and equity. It is essential to balance all three elements at each point in time. The balance sheet formula is calculated by taking beginning balance plus ending balance minus any closing entries for the year. 

Financial Projections Examples

To help you get started with your own financial projection, we have created some free financial projection templates that you can download and use. The files are in Microsoft Excel and Google Sheets formats.

Finding the money can be a challenge, whether you’re ready to launch a new business or expand an existing one. Maybe your credit isn’t stellar, or you have struggled with traditional bank loans in the past, but whatever the reason, a microloan may be an opportunity that you haven’t come across yet. 

A microloan is a small business loan that banks often don’t want to make. They are typically small loan amounts from $500 to $25,000, but some go up to $150,000. A microloan has lower requirements than traditional small business loans or SBA loans but don’t have super high-interest rates like a credit card or overdraft fee.

Who offers microloans?

There are a few different microlenders in Missouri, and funding often comes from the Small Business Administration (SBA) U.S. Department of Agriculture (USDA)

Microloans are usually provided by community-based economic development intermediaries, city government, or nonprofit financial institutions that have a mission of supporting small businesses and the jobs entrepreneurs create. Some places to look include:

• Missouri Department of Economic Development
• Nonprofit organizations such as Justine Petersen, Grameen America, LiftFund, and Accion
• Community-based microloan providers such as the City of St. Louis or AltCap in Kansas City.
• Peer-to-peer (P2P) lending from LendingClub or Kiva. 

Who can apply for a microloan?

To get a small business microloan, eligible borrowers need to be at least 18 years old and have some money in the bank. You also need to meet certain income requirements or show that your previous year’s revenue was sufficient to repay the requested amount. 

Many programs target low-income and minority communities to help spur economic development in underserved and high-poverty areas.  

What are some benefits of small business microloans?

One of the biggest benefits of small business microloans is that they can help small businesses that don’t have the best credit score or haven’t been in business for a long time to get the money they need to start and grow their company. 

Small business microloans also offer borrowers a chance to build their credit history. Many microlenders can be more flexible for borrowers with bad credit than a traditional lender.  Some microlenders, however, require good credit. 

What can a microloan be used for?

Every program has different guidelines, but most microloans are used to start or grow a business. Funds can typically be used for working capital or purchase inventory, supplies, furniture, fixtures, machinery, and equipment. Funds can sometimes be used for real estate, but not always.

What are the interest rates?

The interest rates on microloans vary but are typically lower than those on credit cards, so this can be a more affordable option for small businesses. Kiva offers small business loans with no interest rate, while LendingClub provides small business loans with an APR of 13.99% – 35.89%.  

How to apply

A small business microloan is not for everyone. Microloans are small, the amount you’re looking to borrow isn’t large, and the repayment terms are different from traditional loans. You have to be comfortable with these differences before moving forward. 

To get small business microloans, small businesses must prove that they have a viable small business idea and the ability to repay the small business loan. Small businesses must submit an application with their supporting documentation (most lenders require bank statements and a business plan, which can be found online on sites like LivePlan). 

Most loans, but not all, will require some form of collateral, as well as the personal guarantee of the small business owner. 

Some organizations also provide additional services at no cost, such as small business coaching, marketing assistance, and financial training to help ensure the sustainability of the business. 

If you meet the qualifications, a small business microloan can help you get the capital you need to start and grow your small business.

SBIR stands for Small Business Innovation Research and is a federal program that gives awards to small businesses through three phases. The first phase tests the market feasibility of an idea or technology; the second focuses on development and demonstration; and the third is for transitioning successful innovations from prototypes to fully commercialized products. These awards are made by eleven federal agencies.

By including qualified small businesses in the nation’s R&D arena, high-tech innovation is stimulated and the United States gains entrepreneurial spirit as it meets its specific research and development needs.

How Does The SBIR Program Work?

The SBIR Program is designed to promote technological innovation and new products from U.S.-based small businesses, such as universities and non-profit research institutions that engage in the R&D process. It gives small high-tech businesses an opportunity to contribute and maintain a strong role in today’s technology-based economy while expanding the role of women and minorities as innovators.

Small firms apply to a federal agency for a specific research or R&D project that falls within the scope of one of the government’s R&D areas. The firm then completes the project using its own resources.

SBIR targets the entrepreneurial sector because that is where most innovation and innovators thrive. However, the risk and expense of conducting serious R&D efforts are often beyond the means of many small businesses. By reserving a specific percentage of federal R&D funds for small businesses, SBIR protects the small business and enables it to compete on the same level as larger businesses. 

Since its enactment in 1982, as part of the Small Business Innovation Development Act, SBIR has helped thousands of small businesses to compete for federal research and development awards. Their contributions have enhanced the nation’s defense, protected our environment, advanced health care, and improved our ability to manage information and manipulate data.

What Are The Eligibility Requirements For SBIR?

Small businesses must meet certain eligibility criteria to participate in the SBIR Program.

• American-owned and independently operated
• For-profit
• Principal researcher employed by business
• Company size limited to 500 employees

Who Funds SBIR Awards?

The SBIR program has been around since 1982, and over the years it has awarded more than $30 billion to small businesses. This money has helped to create new jobs and technologies, and it has led to the commercialization of products like energy-efficient windows and cancer therapies.

Each agency has its own guidelines, and award amounts vary from agency to agency.

• Department of Agriculture
• Department of Commerce
• Department of Defense
• Department of Education
• Department of Energy
• Department of Health and Human Services
• Department of Homeland Security
• Department of Transportation
• Environmental Protection Agency
• National Aeronautics and Space Administration
• National Science Foundation

These agencies designate R&D topics and accept proposals.

What Are The Three SBIR Phases?

The agencies above make SBIR awards based on small business qualification, degree of innovation, technical merit, and future market potential. Small businesses that receive awards or grants then begin a three-phase program.

• Phase I: The objective of the market research and feasibility phase is to establish the technical merit, feasibility, and business potential of the proposed innovation. Awards up to $225,000 for approximately six months support for exploration of the technical merit or feasibility of an idea or technology.
• Phase II: The second phase is the development and demonstration phase in which a company develops a product or service that has been proven to be feasible during Phase I. The objective of this 24–36 month development and demonstration phase is to bring the innovation to a point where it can be manufactured and sold in the commercial market. Phase II awards are up to $1,000,000 for as many as two years to expand Phase I results and only Phase I award winners are considered for Phase II.
• Phase III: The objective of this 6–12 month transition phase is to help small businesses move successful Phase II innovations from the laboratory or prototype stage to fully commercialized products. The small business must find funding in the private sector or other non-SBIR federal agency funding.

For more information, visit the SBIR website.