Everything You Need to Know About Expanding Your Business

With an SBA Loan

Table of Contents

Chapter 1: Signs you are ready to grow your business

Chapter 2: The importance of planning for your business

Chapter 3: Setting and achieving your growth goals

Chapter 4: Determining if you qualify for SBA loans

Chapter 5: Nine myths about SBA loans

Chapter 6: Three SBA financing programs for businesses that export

Chapter 7: Ready? Set. Go!

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If you’ve been successfully running your own small business for

some time, you may be asking yourself “Now what?” The answer

may be to expand your business,

and you may need a U.S. Small

Business Administration (SBA) loan

to do it.

Before you take the leap, there are a

few things to consider. In this guide,

we’ll walk you through determining

if you’re ready to expand your business, the importance of

refreshing your business plan, qualifications needed for an SBA

loan, myths about SBA loans and more.

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CHAPTER ONESIGNS YOU ARE READY TO GROW YOUR BUSINESS

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New market opportunities

When assessing new market opportunities, it is important to first identify the strength of your industry. If you operate within an industry that is booming, it will be easier to grow your business. Conversely, if your industry is fading, expansion may be difficult, because it might not be sustainable. However, a more stagnant industry could be an opportunity for your business to focus on expanding your product or service offerings.

Another great way to identify if your business is ready for growth is to simply listen to your customers. Are they asking for more products, expanded service hours, more staff or additional locations? If they are, it can be a strong indicator it is time to grow to meet those needs. Remember, if you aren’t able to keep up with your customers’ needs, they may turn elsewhere.

Finally, is there a component in your supply chain you could begin producing yourself? By controlling more of your supply chain, you can reduce your costs and risks, which ultimately increases profits. For some businesses, this is not a viable option, but for others, it can be a great way to begin expanding your business’s reach.

Ability to rely on others

Your business wouldn’t run well without a supportive team and it certainly won’t grow without one. If you are thinking about expanding your business, first take a look at your management team. If you have a strong, stable management team that is just as excited about

your business model and potential growth as you are, that is an excellent sign you will have all the right support when it comes to expansion.

The same goes for your employees. Are they excited about the prospect of more business and opportunities to advance their careers? If you can’t identify these qualities in your team members, you may want to set the growth plans aside until you are sure you have a strong team that is ready to grow with you.

Your advisors are another critical part of your growth team. You may need an accountant to confirm your financial growth over the years, a banker to provide that next line of credit to expand your company or a real estate agent to help you select a new location. These partners are critical, because they can help you avoid pitfalls during your expansion and put you on the path to success.

If you have demonstrated financial strength, see market opportunities and have a great team at your side, it may be time to put your plans to expand into action.

Long-term financial growthThere are two important financial factors to look for when deciding if it is time to grow your business:

1. If you have a regular increase in profits (gross income minus expenditures) then your business might be ready to grow. However, you need to ensure your business is maintaining consistent, long-term growth numbers for at least three to five years before considering expansion.

1. Another financial indicator is when you have steady, positive cash flow and your short-term financing is no longer keeping up with your business needs. For example, if you are selling inventory at record amounts with increasing profits, but your short-term financing is insufficient to fund your growth, you may be ready to expand.

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Most entrepreneurs create a well-thought out business plan when they launch their business. Now, the

question is: how often does a business owner look at the plan after that? It can be easy to get caught up

in the daily craziness of running your own business and push that business plan to the back burner. But

creating, sticking to and refreshing a business plan is critical in your business’s long-term success.

Reviewing your business plan is also the first step to expanding your business. It can help you determine

if it’s a good time to take out a loan, hire more employees, move to a new space and more. If you find

that you’ve outgrown your original plan or if you decide to expand

your business, you’ll need to refresh your business plan

with new goals, a current market analysis, and new

marketing and financial plans.

Ask yourself: Does my existing business plan help me

achieve my current definition of success? If your answer

is no, it’s time to go back to the drawing board and revamp

those outdated sections. And once you create your up-to-date

business plan, you’ll need to create a timeline to achieve those goals.

Break the timeline benchmarks into bite-sized pieces: Three

years, one year and even quarterly. Each passing business

quarter should have moved your company closer to the goals

you set. You built this business for a reason, now make sure it

achieves everything you envisioned it would.

CHAPTER TWOTHE IMPORTANCE OF PLANNING FOR YOUR BUSINESS

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Do� my exis�ng busin�s plan help me achie� my

current defini�� of succ�s?

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Many of us like to tackle major goals one at a time. This certainly applies when it comes to your career. No

matter how your journey to owning a business began, you got there by reaching one milestone at a time.

There are many ways to embark on your business goals, all of which include strategic business planning.

To help you get started, here are three steps to positioning your small business for growth.

CHAPTER THREESETTING AND ACHIEVING YOUR GROWTH GOALS

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Step oneOutline your growth goals

As you plan for growth, you’ll

need to outline and define

your goals. What do you want

to accomplish? Some ideas

may include:

• Increasing your total

number of customers

• Bringing on more

employees

• Expanding the services

you offer

• Adding additional

locations

Any business goals you draft

should be SMART goals,

meaning they are Strategic,

Measurable, Achievable,

Realistic, and are built within

a Timeline. Once you have

yours outlined, make sure

they meet each of these five

requirements.

Step twoConsider how your goals fit into your business plan

As we discussed in the

previous chapter, business

planning is not a one-time

task, but an important

ongoing activity. The result

of creating a business plan is

a roadmap that shows where

you want your business to

go and provides directions

for how to get there. While

setting your goals, ask yourself

the following questions to

ensure they line up with your

overall business plan:

• What resources will I need

to achieve these goals?

• Do I need to consult with

other partners (legal,

financial, marketing, etc.)?

• Are the right people in the

right positions to get the

necessary work done?

Step threeGet your team in place

and get started

Making sure you have

people lined up to take on

the work needed is crucial

to ensuring you meet your

small business’s goals. This

may mean meeting with

your external partners,

bringing existing employees

up to speed on your plans,

hiring new operations or

business staff or working

with outside experts. The

right mix of these options

depends on your small

business and your goals.

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CHAPTER FOURDETERMINING IF YOU QUALIFY FOR SBA LOANS

In general, the small business size defined by the SBA is:• For most manufacturing businesses, qualifying companies must have less than 500 employees

• For most wholesale businesses, they must have less than 100 employees

• For most retail businesses, average gross sales cannot exceed $7 million

Reasons to use an SBA loanMany small business owners use SBA loans

because they can offer more flexibility than

conventional financing. With benefits such as

longer repayment, lower down payment and

flexible repayment options, you can see why major

companies such as Apple, Nike, Ben & Jerry’s and

Under Armor used SBA loans in their infancy.

SBA loans are great for business owners who want to:• Buy an existing business

• Expand their physical location

• Need equipment for their business

• Have longer or flexible repayment terms or lower down payment

• Increase their inventory or term out stale line of credit balance

• Build credit for the future

Consider your business goals for the next year, five years or even 10 years.

Would an SBA loan help you reach your objectives?

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Now that we’ve covered updating your business plan and setting growth goals, your next question may be:

How do I get the financing I need to achieve my goals?Fortunately, the SBA has a variety of resources and services to help, including special loans that are

designed specifically for small businesses. In fact, according to the SBA, bank loans to small businesses

totaled more than $30 billion in 2018.

Many business owners do not realize the benefits they’re entitled to as a small business – particularly in

understanding who can qualify for SBA loans.

Small businesses comprise 99.9% of all businesses

28.8 million small businesses

48% of private sector employees

In The United States

Source: SBA O�ceof Advocacy

CHAPTER FIVENINE MYTHS ABOUT SBA LOANS

SBA loans can help entrepreneurs start, manage or expand their businesses. An experienced SBA lender can determine if your business is eligible and can help you separate facts from fiction because there are some misconceptions about these loans. Here are nine common myths and the facts that set the record straight:

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MYTH #1: Successful businesses don’t need an SBA loan.

FACT: Many successful small business owners use SBA loans because these loans can offer more flexibility than conventional financing.

MYTH #2: The SBA helps people with bad credit get a loan.

FACT: An SBA guaranty helps overcome some financing challenges, but a bad credit history is not one of them. The goal of the SBA is to provide assistance when a borrower’s collateral may not meet conventional lending standards. The SBA requires:• A good business plan (showing good cash flow)• A good credit history

MYTH #3: The SBA helps businesses with weak cash flow get loans.

FACT: The SBA takes projected cash flow into consideration, but historical cash flow takes a higher priority. (Exception: financing for business start-ups.) The SBA requires that a business must demonstrate that it can repay:• Its existing debt• Any proposed new debt

Myth #4: The SBA itself lends money to a small business owner.

FACT: Your bank actually lends the money.• If you, as the borrower, fail to repay the bank, the SBA will repay the bank a portion of

what it is still owed• The size of the portion depends on the SBA program being used

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MYTH #5: SBA loans are grants from the government that I won’t have to pay back.

FACT: This is not a grant. The SBA operates a loan guarantee program. This means:• The SBA expects the loan to be repaid• Your bank expects the loan to be repaid

MYTH #6: Any small business can get an SBA loan.

FACT: The SBA defines small business with specific criteria. An experienced SBA lender can determine if your business is eligible. According to SBA requirements, the business must:• Be independently owned and operated• Not be dominant in its field• Meet SBA employment or sales standards• Not operate in an industry or for a purpose that is prohibited by SBA rules

MYTH #7: There will be piles of red tape and tons of paperwork.

FACT: Like any journey, the more experienced your guide, the smoother the trip. That’s why it’s important to work with an SBA-preferred lender. These lenders are:• Knowledgeable in small business financing• Dedicated to making the loan process straightforward and hassle-free• Able to process SBA loans faster than banks without this qualification

MYTH #8: I can get SBA loans at any financial institution.

FACT: Banks need to be approved to participate in multiple SBA programs and can earn designations such as an SBA-preferred lender. These designations set the bank apart from many other institutions. Here’s why:• Banks must be invited by the SBA to participate in its programs• Not all banks qualify

MYTH #9: I can easily refinance my existing business debt into an SBA loan.

FACT: There are serious considerations to think about:• Very specific criteria must be met in order to use an SBA loan to refinance a

conventional loan• Before you pass on SBA loans in favor of conventional options, make sure you fully

understand the implications

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When looking for ways to expand your current line of business, it might be worth the time to consider doing business outside of the United States. Quite literally, export markets can open up a world of growth opportunities for businesses, including increasing your customer base and sales volume.

Global businesses also tend to experience the stabilization effect, which means they’re more likely to overcome eras when there were losses or downturns in the domestic market. In other words, expanding your business through exporting can offer a great cushion effect.

The SBA offers three export financing programs designed to make it easier for companies to do business internationally:

CHAPTER SIXTHREE SBA FINANCING PROGRAMS FOR

BUSINESSES THAT EXPORT

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Export Express

Export Working Capital Program

(EWCP)

International Trade Loan

Program

Export Express loans can

be used for any business

purposes that will enhance

a company’s export

development, such as

working capital, inventory

or equipment purchases to

expand operations.

EWCP loans give greater

flexibility in negotiating

export payment terms. These

loans are often used for:

• Financing suppliers or

inventory

• Working capital

• Financing stand-by

letters of credit or down

payment guarantees

Businesses that plan to start

or to continue exporting, can

use International Trade Loans

for fixed assets and working

capital. The funds can be

used to acquire, construct

or renovate facilities and

equipment used to produce

goods and services involved

in international trade.

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CHAPTER SEVENREADY? SET. GO!

Whether it’s a one-woman legal consulting business or a 400 employee manufacturer, small businesses play a significant role in our state and national economies. In fact, according to the SBA, there are 28.8 million small businesses in the United States, accounting for 99.9 percent of all businesses. The percentage is similar in Iowa, where 266,384 small businesses make up 99.3 percent of our state’s businesses.

Small businesses play a vital role in our community and economy, which is why the SBA provides support and resources for small business owners to expand and succeed. If you’ve given your business plan some thought and feel ready to expand your business with an SBA loan, the SBA-preferred Bankers Trust Business Banking team is ready to help.

Contact Us620 S. 60th Street

West Des Moines, IA 50266

(515) 248-1328

Learn more about the Bankers Trust Small Business Loans Programwww.bankerstrust.com/sba

NMLS ID: 440379

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As an SBA Preferred Lender, Bankers Trust

serves as a partner in helping reach your

business’s goals and a constant resource for

growth. Since opening in 1917, we’ve set out

to help the communities we serve flourish

by offering a variety of small business loans.

We embrace the spirit of entrepreneurship

and understand the importance of small

businesses to our society and our economy.