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< Previous“ 9 | May 2023 Ask Dakota Business Lending As a key resource for business owners, Dakota Business Lending wants to help you find the answers you need to reach your goals and fulfill your dreams. That is why we are answering YOUR questions about all things financing, entrepreneurship, and small business. This issue, let’s talk about financing for startup businesses… What are some common challenges startup businesses face? Why is financing so hard to get for startups? One of the biggest challenges that startups face is the unknown: where to start, what resources are available, what the next step is, or who to reach out to first. Some startup businesses also may not have the cash or savings required to get started or haven’t truly analyzed their business model to know if their business will actually make money. Startup businesses often have no proven history, which makes it challenging for financing institutions to truly evaluate the risk. Limited cash for a down payment or no collateral to secure the loan also make this challenging. One of the biggest obstacles, however, is a lack of understanding of financials and projections. As a business owner, it is critical to understand your numbers and where they came from, not only so you can share that information with your lender, but also for your long-term success. Have a question about financing programs, small business, or entrepreneurship? Contact us and allow us to help you get the answers you need to take your business to the next level.“ “ dakotabusinesslending.com | 10 What is required for startup loans? What credit score is needed to get a startup loan? What is the next step if startup financing is denied? While documentation requirements will vary depending on the type of loan you are considering, the following items are commonly required to start a loan application: • Purpose of loan (equipment, inventory, working capital, real estate purchase, etc.) • Amount requested and how it will be used, including owners’ equity available for down payment • Business plan • 2-3 years of business financing projections – income statement, balance sheet, and cash flow as well as explanation of assumptions used for the projections • Schedule of existing debts • 2-3 years of personal tax returns • Personal financial statements from principal owners • Resumes of principal owners The credit score requirements will vary depending on the financial institution, but generally speaking, any credit score below 650 will require some work for improvement. If there are outstanding collections or judgements, those need to be paid. If there is a high frequency of late payments, the borrower needs to find a way to get current. For more information on credits scores and tips and tricks of how to improve them, read our Credit, Schmedit article. https://www.dakotabusinesslending.com/credit-schmedit/ The most important thing to do is to ask why. Seek to understand the reasons why the financing was denied and then go fix it. Don’t be afraid to ask clarifying questions with your lender, or even if they have any advice as to how to fix it. This “no” doesn’t have to stop you from your business venture. Seek answers, find solutions, and keep trying. 11 | May 2023 SBA 504 Loan Application Do’s and Don’ts You are looking for financing for your business and come across the SBA 504 loan program. You visit with your banker and the Certified Development Corporation (CDC, like Dakota Business Lending) about the details and are ready to start the application process. You pull up the application on your computer and, at first glance, you are already feeling overwhelmed. “Where do I even begin?!” Do not start worrying too soon! While the application may look a little overwhelming at first, you will soon learn that this document is not as bad as it seems. Our team has witnessed hundreds of entrepreneurs and small businesses owners who were once in your shoes tackle this document and progress their way towards acquiring financing. While working with these business owners, we have also compiled a list of some helpful “do’s and don’t’s” that we have learned along the way to help make this process smoother and less overwhelming. Here is just a few we would like to share with you. dakotabusinesslending.com | 12 Do: Include Dakota Business Lending as early in the process as possible. The application is a TEAM effort, and your Dakota Business Lending loan officer will be the one helping you create your loan application and take your business to the next level. The earlier we are involved, the better! Let Dakota Business Lending and your bank know of your timeline and wishes for the project Verify any owner or guarantor over 20% for both real estate holding company and operating company is willing to provide personal financial information Disclose any prior bankruptcies, pending lawsuits, prior misdemeanors/felonies (even if dropped or expunged from your record) Provide information about other companies that you have ownership in (possible affiliates) Share information about any franchise, dealing, licensing, or other types of agreements that you have for your business If you are buying an existing business, be sure you are able to obtain 2 years of tax returns and current financial information from the seller Have an initial kick off meeting with both Dakota Business Lending and your bank to make sure everyone is on the same page. We will then do the hard work of guiding you through the application and assisting you with forms as much as possible. Get excited about the amazing financing package structured specifically for YOUR BUSINESS! Don’t: Leave your bank or Dakota Business Lending hanging. We are here to help bring you to the finish line faster! Be vague (the more detailed information, the better!) Leave out any project cost details Change details about the project or companies after starting an application unless consulting with us first. You do not want to do something that will cause the project to be ineligible! Hesitate to ask questions - WE ARE HERE TO HELP! Forget to tell your friends about this awesome program! x x x x x x13 | May 2023 Introducing... More Resource Partners It is very common for small businesses to, at some point, need networking, training, and other professional development opportunities to grow themselves and their business. Fortunately, there are many resources available to meet those needs. Here are some great networking and learning organizations that may have a location in your community. Chamber of Commerce The U.S. Chamber of Commerce has hundreds of branches, locations, and offices across the nation. Businesses and community organizations can become members and get access to incredible benefits including a strong network of support, networking and marketing opportunities, community calendars, job boards, training events, discounts, information on issues affecting the region, and more. North Dakota – https://www.uschamber.com/co/chambers/north-dakota Montana – https://www.uschamber.com/co/chambers/montana Minnesota – https://www.uschamber.com/co/chambers/minnesota Economic Development Associations Most cities/counties in North Dakota, Montana, and Minnesota have a local economic development organization that works to invest in the community, promote business and development, and strengthen the economy. While all organizations are a little different, many offer various entrepreneurial resources such as community grant or loan programs, trainings events, and networking opportunities for both individuals and business members. North Dakota – https://ednd.org/member-directory Montana – https://www.medamembers.org Minnesota – https://www.edam.org Startup / Entrepreneur Groups There are so many local events and groups for startup businesses and entrepreneurs. Organizations like 1 Million Cups host events in many cities throughout the nation that provide networking and learning opportunities for both new and seasoned entrepreneurs. You can visit with your local chambers and economic development groups or search for community calendars to find events in your area. North Dakota, Montana, and Minnesota are filled with unique programs, organizations, and opportunities for entrepreneurs. See other resource partners available to help you and your business succeed. https://www.dakotabusinesslending.com/resource- partners/ https://www.dakotabusinesslending.com/more- resource-partners-2/ dakotabusinesslending.com | 14 IT’S TIME... TO UNLOCK THE VAULT! With a vision to showcase the multitude of valuable resources that North Dakota has to offer, Dakota Business Lending has launched the Vault: a comprehensive library of small business financing programs and sources that exist throughout the state today. Big or small, woman or minority-owned, rural or urban, start-up or existing…the Vault is a place where entrepreneurs can explore all that North Dakota has to offer for their small business…right at their fingertips. What’s Inside? Financing options of all shapes and sizes Premium business assistance programs Tools to help propel small businesses Listing close to 150 financing programs for start-up and existing businesses, the Vault features more than 50 key resource providers and partners throughout North Dakota, all available in 1 customized, online library. In just a few clicks, users will generate a custom list of financing programs tailored specifically to their needs. Have a program that is not listed in the Vault? Click “Submit a Program” on the home page to get it added.15 | May 2023 5Ways to Improve Your Cash Flow Everyone wants to save money, but figuring out how to do it can be an overwhelming task. “WHERE DO I BEGIN?” “WHAT RESOURCES ARE OUT THERE TO HELP ME SAVE MONEY?” “SHOULD I FOCUS ON OPERATING COSTS? PAYROLL?” The list of dreaded questions goes on and on. The good news is that there are a variety of options to help small business owners improve their cash flow. Not only that, but when done correctly, these small actions have the potential to take your business to the next level. Here’s just a few: 3 1 2 Business Expenses: The first thing to do is take some time to examine your operating expenses and carefully consider what is and is not necessary at the time. Categorize your expenses into (1) absolutely necessary and (2) nice, but can get along without, and see if you can identify small opportunities to save money. It may not seem like much at the time, but it can add up fast! Incentives for Early Payments: Depending on your business type, incentives for early payment might be an option. By offering some type of discount to your customers for paying up- front, you can increase your cash flow instantaneously AND save your customers money. It also saves the business time and effort when trying to “chase down” payments in the future. Review Your Business Model: Creativity can be a powerful tool, even in the realm of financing. Take some time to review your business model and see if there are any new and innovative ways that you can generate more revenues. Are there any additional products or services you may be able to offer? Can you sell your products online? Are there any training courses you can offer for your customers? If you are out of ideas, try asking your customers what they would like. Not only will this expand your business model, but can provide you with additional revenue streams. ? dakotabusinesslending.com | 16 As always, ask your lender about these options and other ways that you can preserve cash flow and take your business to the next level. 4 5 Refinance Options: Your business might benefit from a debt refinance option (especially if your current debt has steep payments or if you are facing a large balloon payment). For refinancing, you will have one of two options: • Straight Refinance – this is where the lender may be able to provide a lower interest rate and/or re-amortize the debt over a longer period, resulting in lower monthly payments. • Refinance with Cash-Out – this option is for those businesses that need additional working capital or are looking to fund some type of expansion. In this case, if there is equity in your building, you could borrow against it and use the cash for business operations. Loan Deferments: If your business is experiencing severe financial difficulties and you have explored all other options, you may have the option to defer your loan payments. This option, however, is granted only for extraordinary circumstances and you must be able to show your plan for how your business will improve financially after the deferment period. Most deferment options range from anywhere between three to six months, which will help free up cash for your business to cover expenses during a time of revenue decline. If you decide to go the deferment route, be sure to ask about the following details: • Is this a principal-only (where you continue to make interest payments) or principal-plus-interest (where interest keeps accruing during the deferment) deferment? • How does the catch-up plan work? Does the bank put these payments at the end of the loan and extend the maturity, or will they require the catch-up to be paid as soon as the deferment period is over? These are some of the best ways for small business owners to improve their cash flow today. While some of these may seem small, the long-term effects can be substantial. Contact your local lender to discuss your options and what would work best for you and your business.17 | May 2023 Small Business Spotlight: Johnson Family Dentistry Dentistry is in Dr. Kirsten Andrews’ blood. Her father had been operating his own dental practice –Johnson Dental Clinic - in Devils Lake, ND since 1977, but wasn’t until Dr. Andrews had a positive, firsthand experience of her own that she decided to follow his footsteps. After graduating dental school in 2007, she moved back to her hometown and bought her father’s practice. He worked alongside her until retiring fully from dentistry in 2015. She’s been serving her hometown community ever since. “I didn’t always want to follow in my father’s footsteps, but while I was working for a consulting company in Boston, I had a root canal done. That dentist took me from excruciating pain to comfort, and I thought that I could do that for other people: take them from a miserable situation and make them feel better. A light switch went on in me and I knew I had to become a dentist.” By 2013, Dr. Andrews needed a larger space to properly serve her patients. The business was leasing a building at the time, and Dr. Andrews knew that if she wanted to grow the business, she would need a building for Johnson Family Dentistry to call its own. She had a place picked out – all she needed was the financing to make the purchase. Dr. Andrews partnered with Dakota Business Lending and Ramsey National Bank to create a financing package. Through this partnership, she used the SBA 504 loan program to purchase a bread store, build an addition, and convert it into a new dental office. She also secured a DMF IRP loan to purchase equipment for her practice and received additional financial assistance from Forward Devils Lake for the expansion project. “I can fix teeth but I’m not a numbers person, so this partnership was instrumental in helping me move forward. The interest rates were comfortable for me and while the process took a while, it was very seamless. The process of getting a loan and building my dream office was made a lot easier because of Dakota Business Lending.” dakotabusinesslending.com | 18 One thing Johnson Family Dentistry prides itself on is the use of technology. Dr. Andrews has done significant traveling and continuing education to provide quality care in rural North Dakota. “Devils Lake doesn’t have any specialist in town, so many of the more involved or invasive dental work would typically get referred to a specialist,” Dr. Andrews explained. “Because of our use of technology, we are able to do a lot of that work right in our office.” Among these are the ability to place dental implants, crowns in just one visit, laser removal for tongue ties and lip ties, and sleep dentistry. “I’ve had to rely on so many of the resources that the dental profession has provided me…. It’s important to reach out and ask as many questions as you can. Find out what other businesses in the industry are doing and stay in close contact.” While the journey hasn’t been easy, the results are incredibly rewarding to Dr. Andrews. “I feel like I’ve become a better leader throughout this whole process. I’ve learned to make some tough decisions and take leaps that I wouldn’t have before. The rewards of being a business owner have been incredible, and I hope to inspire others to do the same.” For more information on Johnson Family Dentistry: https://johnsonfamilydentistrynd.com/ If there’s one thing that Dr. Andrews has learned throughout her journey as a business owner, it’s that you can’t do it with- out a wonderful team surrounding you. She encourages other business owners to find a network of support.Next >