Get a Business Loan in Minnesota: Options for Small and Medium Businesses 

5 Key Questions for Your Business Loan Request

Before approaching a financial institution, it’s essential to prepare your loan request by answering these five key questions:

• How much funding do you need?
• What will the funds be used for?
• How long do you need to repay the loan?
• How will the loan be repaid?
• What collateral will secure the loan?

Answering these questions ensures your loan request is clear and positions your business for success during underwriting and approval.

Example 1: Small Business Equipment Loan in Minnesota

A manufacturing business in Minnesota might structure their loan request as follows:

We are seeking a small business loan of $500,000 to purchase manufacturing equipment. This equipment will reduce expenses by $100,000 annually and improve production speeds. With a useful life of 10 years, we request a 7-year loan, repaid through cash flow and cost savings. As collateral, we will offer a purchase money security interest in the equipment and business assets.

Example 2: Real Estate Loan for Minnesota Businesses

A company purchasing property for expansion could write:

We need a real estate loan of $1,500,000 to buy a 24,000 SF office/industrial building in Anoka, MN. This transition from leasing to owning will reduce long-term costs. The building, built in 2001, is in good condition but requires $250,000 in improvements. We will repay the loan using cash flow and rental savings.

Why Preparation Matters

These examples provide a clear framework for presenting your loan request, helping our lenders tailor a customized proposal. Proper preparation saves time and ensures a smooth approval process.

What to Prepare for Your Business Loan Application

To streamline your business loan process, it’s important to prepare key documents and details in advance. At Security Bank & Trust Co., we’ve outlined the essential items you’ll need to provide:

1. Brief History of the Company, Ownership, and Management

Your business’s story matters to us. Share:

• The history of your business and its achievements
• Key management team experience
• Ownership structure

Understanding your background helps us craft customized loan solutions.

2. Three Years of Business and Personal Tax Returns

Tax returns give us insight into your financial performance and stability. We evaluate:

• Net income, depreciation, interest, liquidity, and capital
• Any one-time events impacting your results (e.g., major sales or customer charge-offs)

Pro Tip: Highlight unusual or one-time events to give us a clearer picture of your cash flow.

3. Personal Financial Statements of Principals and Guarantors

Personal financial stability is often key to securing a business loan. A personal guaranty is typically required, and these statements help us:

• Assess the financial health of business owners
• Ensure a stable and cash flow-positive profile

4. Current Income Statement and Balance Sheet

Tax returns may not reflect your current performance, so we also request up-to-date financials, including:

• Revenue changes (e.g., new contracts or customer losses)
• Recent equipment acquisitions or depreciated assets

Complete, accurate information speeds up the decision-making process.

5. Sales, Accounts Receivable, and Accounts Payable Concentrations

We analyze:

• Sales concentrations over 10% of gross revenue
• Aging reports for accounts receivable and payable
• Concentrations or risks in your accounts

Providing these reports ensures a thorough underwriting process.

6. Purchase Agreements or Invoices

If you’re financing equipment or real estate, include purchase agreements or invoices. These documents help us:

• Verify the purchase and terms
• Understand associated costs (e.g., legal or commissions) that may not be financeable

Click Here for a Complete Commercial Loan Applicant Checklist

Why Preparation Matters

Organized information makes the loan application process faster and more efficient. By preparing these items in advance, you:

• Reduce delays in processing
• Enable more in-depth discussions with our lending experts
• Build a stronger financial partnership with Security Bank & Trust Co.

At Security Bank & Trust Co., the underwriting process is designed to not only evaluate your loan request but also to strengthen the partnership we build with your business. By this stage, we’ve already reviewed your information, discussed your plans, and gathered insights into your goals.

What is Loan Underwriting?

Loan underwriting is how we evaluate your business’s financial health and assess the risks of the loan. It involves verifying your documents for accuracy, analyzing key metrics, and ensuring the loan is structured to meet both your needs and our lending guidelines.

Our goal is to make the process smooth, transparent, and efficient, so you can focus on growing your business.

How Long Does the Process Take?

At Security Bank, we aim to streamline underwriting for small business owners. Here’s what you can expect:

• Initial Review: 3-5 business days to verify submitted documents.
• In-Depth Underwriting: 5-10 business days to analyze financials and assess risk.
• Proposal Stage: Typically within 2 weeks, depending on the complexity of your request.

Pro Tip: Providing organized and complete financial information upfront can help reduce delays.

What We Look for During Underwriting

During the underwriting process, we evaluate several factors to determine your business’s financial health and creditworthiness:

1. Cash Flow: Your ability to repay the loan from business operations.
2. Collateral: Assets to secure the loan, such as real estate, equipment, or receivables.
3. Credit History: Personal and business credit scores.
4. Management Experience: Your leadership team’s expertise.
5. Industry Risks: Market trends that could impact your business.

Key Financial Metrics We Use

To ensure fairness and transparency, we evaluate the following financial metrics as part of the underwriting process:

1. Debt Service Coverage Ratio (DSCR): EBITDA ÷ Debt Service Payments
   • Indicates whether your business generates enough income to cover its debt obligations.
2. Current Ratio: Current Assets ÷ Current Liabilities
   • Measures liquidity and short-term financial stability.
3. Quick Ratio: (Cash + Accounts Receivable + Marketable Securities) ÷ Current Liabilities
   • Evaluates immediate liquidity, excluding inventory.
4. UCA Cash Flow Coverage Ratio: Net Cash after Operations ÷ (Current Portion of Debt + Interest Expense)
   • Assesses whether cash flow from operations can cover debt payments.
5. Revenue Growth Trend: Tracks how your business is expanding over time.
6. Debt to Tangible Net Worth Ratio: Measures financial leverage compared to industry peers.

These metrics may not define your success as a business, but they help us assess risk and tailor financing options to fit your needs.

Common Challenges and How to Overcome Them

We know that preparing for underwriting can feel overwhelming, so here are some common challenges and how to navigate them:

• Incomplete Documentation: Missing documents can slow the process. Use our Commercial Loan Application Checklist to stay organized and review our Comprehensive Guide.
• Unrealistic Loan Requests: Ensure your requested amount aligns with your cash flow and repayment ability.
• Unexplained Financial Fluctuations: Be upfront about one-time events, like major sales or unexpected losses, that impacted your financials.

Why Choose Security Bank for Your Loan?

As a community bank, we prioritize personalized relationships and local expertise:

• Tailored Advice: We take the time to understand your business’s unique needs and provide creative solutions.
• Local Expertise: We know the Minnesota market and the challenges local businesses face.
• Quick Turnaround: Our streamlined process ensures timely decisions.

Client Success Story: Casa de Corazón

"Casa began its relationship with Security Bank with the opening of its 4th location and first franchise in Edina-Centennial Lakes. Security was pivotal in launching this location and the franchise company. It has been a joy to work with each member of the local team on everything from financing to account setup."
— Natalie Standridge, Founder & CEO, Casa de Corazón

What Makes Us Different

Beyond underwriting, we see ourselves as your partner in success. Our experienced lenders don’t just review your financials—they offer valuable insights to help you grow your business. In fact, many of our clients have saved time and money by leveraging our trusted advice.

At Security Bank & Trust Co., we specialize in helping Minnesota businesses secure the financing they need to succeed. Whether your business requires a straightforward real estate or equipment loan or a more creative, customized solution, our team works closely with you to find the best options.

We also collaborate with local programs, such as:

• Minnesota Department of Employment and Economic Development
• Twin Cities Metro Area and our 21 local branch cities and municipalities
• Initiative Foundations
• Learn More in our Ultimate Guide to Minnesota Business Loans

These resources, combined with our expertise in industries like construction, professional services, real estate investment, and nonprofit organizations, allow us to provide tailored and thoughtful loan proposals.

Here are some of the most popular business loan options we offer:

1. Business Line of Credit for Flexible Cash Flow Management

A business line of credit is a powerful tool for managing your company’s short-term financial needs. It’s perfect for:

• Purchasing inventory or raw materials
• Managing seasonal cash flow gaps
• Handling unexpected expenses
• Refinancing short-term debts

Key Features:

• Loan Structure: Interest-only payments with a variable interest rate
• Term: Typically up to 12 months, renewable upon review
• Collateral: Secured by inventory, accounts receivable, or equipment (often managed with a borrowing base certificate and reporting)

This option is ideal for Minnesota businesses needing flexibility to seize opportunities or navigate temporary cash flow challenges.

2. Business Term Loan for Long-Term Investments

A business term loan is a traditional option for financing major investments and strategic growth. Use it to:

• Purchase fixed assets such as equipment or vehicles
• Fund tenant improvements or capital upgrades
• Acquire another business or franchise
• Invest in technology or infrastructure

Key Features:

• Loan Structure: Lump sum disbursement with scheduled repayments over the loan term
• Interest Rates: Fixed or variable rates available
• Common Use: Business acquisition loans often take the form of term loans

With predictable payments and tailored terms, a business term loan is perfect for entrepreneurs planning significant, long-term investments.

3. Business Real Estate Loan for Property Acquisition or Expansion

If your business is purchasing, constructing, or refinancing real estate, a business real estate loan is the ideal solution. We support:

• Office and industrial building purchases
• Real estate refinancing to reduce interest costs
• Construction projects for expansion or development

Key Features:

• Loan Types: Construction loans, term loans, and lines of credit
• Rates: Fixed rates up to 10 years (with common terms of 3-5 years) or variable rates
• Loan-to-Value (LTV): Typically 75-80% of the property’s appraised value
• Amortization: 15-25 years depending on the loan structure

Minnesota businesses looking to own or expand their physical space can benefit from our competitive terms and personalized guidance.

4. Specialized Loans for Unique Business Needs

Every business is unique, and some financing solutions require creativity and customization. Security Bank & Trust Co. offers specialized loans, including:

• Equipment Financing: For purchasing or upgrading business-critical machinery
• Construction Loans: Tailored to Minnesota contractors and developers
• Municipal Financing: We are a leader in financing cities and municipalities in private placement loans in Minnesota.

Frequently Asked Questions (FAQs) About Business Loan Options

What’s the difference between a business line of credit and a term loan?

A business line of credit is a flexible, revolving loan that lets you borrow as needed and pay interest only on the amount used. A term loan, on the other hand, provides a lump sum upfront with scheduled repayments over a fixed period, ideal for long-term investments.

How do I qualify for a business loan at Security Bank?

Eligibility depends on factors like your business’s financial history, cash flow, credit score, and collateral. Our lending team works with you to ensure you meet the necessary requirements and provide tailored advice.

Can startups apply for a business loan?

Yes, startups can apply for loans, especially if they can provide collateral, a strong business plan, and demonstrate personal creditworthiness. Our team will help guide you through the process.

What collateral do I need for a business loan?

Collateral can include accounts receivable, inventory, equipment, real estate, or other business assets. The type and value of collateral depend on the loan type and amount.

How long does it take to get approved for a business loan?

Approval timelines vary based on the loan type and complexity. For standard loans, you can expect a decision within 2-3 weeks, depending on the completeness of your documentation.

Why Minnesota Businesses Choose Security Bank & Trust Co.

• Local Expertise: With deep roots in Minnesota, we understand the challenges and opportunities businesses face in our communities.
• Customized Solutions: We specialize in tailoring loan proposals to meet the specific needs of small and medium-sized businesses.
• Trusted Relationships: We partner with local municipalities and programs to offer additional resources for your success.