Navigating small business financing in NWA

The entrepreneurial spirit is undeniable in Northwest Arkansas. Local businesses fuel our growth, provide services, create jobs and shape our culture. Building a business is challenging, and the financial landscape is constantly evolving.
In recent years, startup funding has experienced significant changes. According to the Arkansas Capital Scan 2024 report, released in December by the Northwest Arkansas Council and the University of Arkansas, entrepreneurs are relying on a mix of funding sources to help grow their businesses. The report showed that non-dilutive sources of capital, such as government grants and bank loans, have continued to increase and “now represent a critical pillar of innovation funding for Arkansas companies.”

Meanwhile, venture capital investment has remained steady, but angel investors and seed funding have dropped.
What does this shift mean for small businesses seeking funding? Local banks are committed to financing local businesses and adhere to two main drivers in determining financing: cash flow and collateral. While these fundamentals remain consistent, the tools available to support growth are becoming increasingly powerful, particularly through banks’ partnerships with the Small Business Administration (SBA).
Banks that are SBA-approved and SBA-preferred lenders can help provide structured financing for startups and small businesses seeking funding. The SBA 7(a) loan is the most common due to its flexibility to be used for nearly any business purpose. However, there’s one program that has become more beneficial to borrowers recently: the SBA 504 loan (sometimes called 503/504).
Eileen Jennings
While the 503/504 loan has been available since 1958, a recent rule change has made this program more advantageous than ever by expanding refinancing options.
The new rule allows business owners to access their real estate equity up to the full 90% loan-to-value threshold for eligible business expenses, such as payroll, inventory or high-interest debt consolidation, provided the working capital for other business expenses is utilized within 18 months. These changes make it easier for businesses with older, mixed-use loans to qualify for refinancing, allowing them to turn their equity into working capital and potentially lower payments.
For entrepreneurs seeking startup funding, many options are available, including the SBA’s flagship 7(a) loan. As the financing landscape becomes more complex, it’s important to focus on preparation and strong partnerships. My top advice is:• Work on your plan early and often. Don’t quit your day job — yet.• Build your network. Northwest Arkansas is fortunate to have many entrepreneurial support organizations that can help you develop a business plan.• Choose a banker who listens throughout the planning process, not just at the loan application stage.• Ask for critical feedback and use it.• Learn about financing options. If you base your plans around your understanding of a home or car loan, you will be misaligned.• Most of the time it’s not a “no,” but a “not now.” Ask what needs to happen to reach the goal.• Find a CPA and an attorney who’ve worked with small businesses to guide and support you through the process.• Get your personal business in order. Banks rely heavily on your personal credit history and financial health.
Not every new business needs to be a new idea. Many existing businesses are looking for their next owner. Acquiring one can be a great way for entrepreneurs to apply new ideas. SBA loans are ideal for financing these acquisitions.
Whether you’re launching a new idea, growing your business or buying an established one, local banks with SBA experience are the perfect place to start.
Editor’s note: Eileen Jennings is senior director of Arvest Bank’s small business division. The opinions expressed are those of the author.

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