GUIDE: START A BUSINESS IN IOWA | STEP EIGHT:
Find Funding Opportunities
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Calculate Your Startup Expenses
One of the most important parts of your business plan are your financial projections. Not only will you share estimated revenues and profits, but you will also outline estimated expenses. This will really come into play when you are searching for funds to get your business off the ground. By understanding your startup expenses, you will have an easier time estimating profits, conducting a break-even analysis, securing loans, attracting investors, and saving money using tax deductions.
There are expenses most businesses are likely to have, such as licensing fees and website hosting costs. However, there are differences for every business. Check out this list we created that shares some of the most common startup costs. Feel free to copy this list and edit and/or add other expenses that are relevant to your business:
- Office space
- Equipment and supplies
- Communications
- Utilities
- Licenses and permits
- Insurance
- Lawyer and accountant
- Inventory
- Employee salaries
- Advertising and marketing
- Market research
- Printed marketing materials
- Making a website
After you have made your list, it’s time to estimate how much money you will need to get your business started. There isn’t a set dollar amount or requirement to get started, so you may be surprised with how little you actually need to get yourself off the ground. The SBA has put together an excellent calculator that you can use to automatically add up your startup costs.
SBDC Quick Tip: If you are planning a new brick and mortar location – you may be surprised by your needs for remodeling and furnishings. Be sure to get quotes and estimates so your business isn’t underfunded!
Now What?
So you’ve got your estimated startup cost and need to know what to do next, right? No problem – here are 10 different strategies and options available to you to get the funds you need to start your small business as soon as today:
Bootstrap
Maximizing human capital first and using existing and/or self-generated funds second, to take an idea or company from one point to the other without referring to investors or banks. Learn about bootstrapping your business by accessing our funding guide.
Friends & Family Funding
We know what you might be thinking — how can I ask for money from friends and family to start my business without making it awkward? Luckily for you, we have a few tips you can use to make it less awkward, less stressful, and have a better chance at maintaining the relationship if you aren’t able to pay the money back.
Angel investors & venture capital
The terms ‘Venture Capital’ and ‘Angel Investor’ are often confused. Both receive equity (a percentage of ownership in a company), from providing investments into private companies, but there are several differences.
Types of loans available
Getting a loan is just one of the many ways you can fund your business. Luckily, there are many different options at your disposal.
SBA and bank loans
Many banks work with the SBA to provide small business loans. The SBA does not loan money directly to businesses, but instead works with local banks to provide a loan guarantee. This decreases the level of risk for your bank, which then makes it easier for your bank to provide your loan. There are several types of SBA loan guarantee programs that may work for you and your banker.
Iowa loan programs
Iowa offers several small business financial assistance programs in the form of loans and forgivable loans. Eligibility for these programs may be based in part on demographic requirements, job creation, capital investment, wage standards, quality of employment offered and economic benefits for the state and local community.
Crowdfunding
Crowdfunding combines the concepts of crowdsourcing and microfinancing, bringing together various individuals who commit small amounts of money to projects and entities they want to support. This is often done through websites that make it easy for entities to find potential funders. Funders could expect something in return for their contributions—such as equity, products, or services—or they may donate the funds. There are four types of crowdfunding.
Government grants
Grant opportunities are typically reserved for certain nonprofit organizations and municipalities – at least from the state of Iowa. However, there may be opportunities that come up and are offered by the state, or by local governments and organizations. The state of Iowa has a website that lists their funding programs for you to review.
Programs and resources for agriculture
Whether you are thinking of starting a livestock or crop operation, or are one of the many people building a small farm on just a few acres, it can be challenging to launch an agricultural business. Fortunately, there are several resources you can turn to for assistance in helping your dream to grow!
Resources for Women, Minority, Veteran and Disabled Owned Businesses
Diversity in ownership of Iowa companies helps make our economy stronger. There are multiple statewide programs that support women, veterans, minority, and disabled business owners by providing highly specialized services and financing options to help ensure business success.
Frequently Asked Questions
Do you have questions about funding your business? You should consider checking out our Resource Navigator. It houses the contact information of 400 of our most helpful partners from across the state, like the Small Business Development Centers, who provide no-cost confidential assistance to Iowa entrepreneurs and small business owners.
Your funding needs will need to be determined by creating a thorough business plan and financial forecast. A good place to start is to do some general research about the industry you are in, how much the products you want to sell cost throughout the supply chain, and how much it may take to advertise and acquire new customers (or maintain current ones if already in business). The SBA has a helpful calculator you can use to fill out your own costs and get an estimate of how much you will need.
SBA loans, or Small Business Administration backed loans, are guarantees from the SBA (government entity) to banks to minimize risk to the lender if you are unable to repay the loan. Their various programs have helped thousands start and grow their businesses, and in recent times with Covid, keep them afloat during an economic downturn.
This depends entirely on your type of business. If you already have computer and graphic design skills, you could technically sign up as a freelancer on various platforms for free, and begin offering design services to customers with absolutely no advertising. The only real cost is the time spent on the projects themselves. Other types of businesses, such as a manufacturer, will have quite a lot of initial investments (in the form of a loan) needed to set everything up and to acquire new customers. Most commonly for loans, you will need to provide a cash down payment, ranging anywhere from 10 to 25% of the overall loan amount.
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NOTICE: The information included on this website is to be used only as a guide. It is not intended to cover all provisions of the law or every taxpayer's specific circumstances.
