The Minneapolis-St. Paul Business Journal recently hosted a roundtable discussion to tackle all things small business financing. The discussion, moderated by Mike Kinderman, loan officer with Twin Cities-Metro Certified Development Company, featured panelists Kim Storey, director of SBA lending at Highland Bank, Adam Rao, owner of Triple20, Angie Trocke, commercial lender at Highland Bank, Dan Kolar, owner of CRDN of Minnesota, and Ben Hangge, senior vice president of commercial banking at Highland Bank.
Mike Kinderman, loan officer with Twin Cities-Metro Certified Development Company, kicked off the conversation by asking about key eligibility requirements of United States Small Business Administration (SBA) loans, which are loans that are backed by the SBA that help small businesses get access to funding through partnerships with lenders.
Kim Storey, director of SBA lending at Highland Bank, said two of the top eligibility requirements for qualifying for an SBA loan are the business must be a for-profit entity operating in the U.S., and 100% of the business’ ownership must be U.S. citizens or U.S. nationals residing in the country.
“The business also must meet specific small business size standards, demonstrate credit worthiness and show a need for financing,” Storey said. “Also, generally, borrowers must have reasonable owner equity, good character, and have the ability to repay the requested loan.”
Storey added that the actual SBA loan is quite flexible. Most of the financing Highland Bank provides is for working capital, equipment, and business or real estate purchases, although Storey said, in certain circumstances, refinancing existing debt is another eligible use of proceeds.
Angie Trocke, VP and Commercial Banker at Highland Bank, said that the typical SBA financing structure will look different depending on what the money is being used for, whether it is for buying a business, buying real estate, buying equipment, or building out space.
Despite the difference in what an SBA loan can be used for, Trocke added that a minimum of 10% cash equity tends to be the normal amount, regardless of what the financing is for.
Trocke further noted that, when qualifying for SBA loans, one of the most critical financial benchmarks is the borrower’s ability to repay, as reflected in key cash flow metrics, such as the debt service or fixed charge coverage ratios.
When it comes to cash flow, Trocke said it can either be historical or projection-based, and can be a combination of the two, depending on the length of time the business has been in operation. Generally, the SBA will look at a three-year period of cash flow when deciding to grant a loan.
A new development that Storey anticipates becoming a large player in SBA loans are Manufacturer’s Access to Revolving Credit (MARC) Loans, which is a program that launched in late 2025.
Storey said these types of loans provide financing to small, U.S.-based manufacturing businesses, with the program offering flexible, working capital up to $5 million to help manufacturers manage demand. Loans can feature a 10-year revolving line of credit that converts to a term loan.
“I foresee there will be interest in the MARC loan program, as the manufacturing industry struggles with tariffs, supply chain disruptions, and inflationary costs into 2026,” Storey said.
Ben Hangge, Senior Vice President and Commercial Banking Manager at Highland Bank, offered up “4 C’s of Credit” as to what makes a business attractive to banks for financing.
Cash Flow: Banks look for businesses with robust cash flow, ensuring it is sufficient to cover debt obligations, fund growth initiatives, and support capital expenditures. The ability to generate consistent, predictable cash flow is a primary indicator of financial health and repayment capability.
Collateral: Adequate collateral is another key factor. Banks seek assets that can secure the loan, reducing their risk exposure. However, in cases where collateral is limited, other positive attributes may help mitigate this requirement.
Capital: Capital represents the equity reflected on the business’s balance sheet, the net worth of owners or guarantors, or cash investment in new ventures such as acquisitions. Sufficient capital demonstrates a commitment to the enterprise and provides a financial cushion for unforeseen circumstances.
Character: Beyond financial metrics, banks also evaluate the trustworthiness, reliability, and credit history of business owners. A strong track record of responsible financial management and repayment is essential for establishing credibility.
Hangge added that industry specific and broader macroeconomic factors also contribute to what makes a business attractive to banks. When assessing an opportunity, he considers a range of questions tailored to these perspectives to ensure a thorough evaluation of the business.
From an industry perspective, Hangge tends to ask questions such as:
From a macroeconomic perspective, Hangge evaluates broader questions, such as:
If a business has shortcomings that may impact their ability to obtain a loan, Hangge said the SBA program is a great way to help “both businesses and banks find ways to get things done that might not otherwise get done.”
“The SBA program is an excellent way to mitigate many of those shortcomings,” Hangge said. “It can help extend amortization schedules to create more cash flow flexibility if that’s a need. It can mitigate collateral shortfalls, it can help bridge capital or down payment gaps, and it can help mitigate some industry or economic concerns that a bank might have about a business.”
Kinderman continued the conversation along the same vein by asking what business owners can give to banks to make the entire process of obtaining financing easier.
Adam Rao, owner of Triple20, said business owners tend to focus mostly on growth and the top line when, in reality, cash flow is “everything.”
“Cash is king when it comes to how banks operate, how banks think, how debt actually functions and works,” Rao said.
Due to this, Rao said the number one thing business owners can provide to banks in order to improve the likelihood of securing funding is being able to show how cash flows in and out of the business and how an owner will be able to make payments.
“Instead of focusing on revenue or anything that’s non-cash, like net income even on your typical income statement, EBITDA is really the key metric,” Rao said.
Dan Kolar, owner of CRDN of Minnesota, said when he has sought financing, it was crucial for him to have basic financial statements prepared, which all comes back to maintaining a good relationship with the accountant one’s organization works with.
Kolar added that when small business owners do not have a strong relationship with their accountant, especially if they are third-party, things take longer and are not as clear, which can impact how a business looks to a bank.
“I think just having a good relationship with the accountant and making sure your financial statements can be very clear and concise is one of the most important things,” Kolar said.
Kinderman, as a lender himself, echoed this sentiment, saying it is impossible for someone to be an expert in everything.
“I appreciate when business owners we work with recognize they might have an area of weakness and then they lean on their partners,” Kinderman said. “They lean on those trusted partners like a CPA or accountant to make sure that they are still getting the information needed to be able to have a positive impact on the operations of their company.”
Kinderman shifted the conversation over to the kinds of changes that exist within SBA lending and how they are affecting small businesses.
Storey said one of the biggest changes in SBA lending has been the underwriting criteria becoming more standardized and consistent across the program. She added that the Standard Operating Procedures (SOP) was released in 2025 restored several policies that had been in place in previous years.
“As a result of that, lenders are analyzing addbacks, reviewing broker adjustments a little more closely, focusing on global debt service coverage ratios, particularly when you’re looking at acquisitions and real estate financing,” Storey said.
She continued by adding that there has been a re-emphasis on 10% being the minimum equity injection, which is “absolutely shaping deal structure today, particularly for new businesses.”
Ownership structure is also something that has recently changed, since SBA loans now have a citizenship requirement in order to be eligible, according to Storey.
“That has become more front-of-the-line due diligence for bankers and could affect deal structure,” Storey said. “There could potentially be changes in ownership if there isn’t a party that might qualify now that did maybe even a month ago.”
As the SBA landscape continually shifts, Storey said it is crucial for banks to support their clients through these changes.
Highland Bank has invested in having a dedicated team that is in charge of managing the regulatory compliance and risk management that goes along with SBA lending, according to Storey.
She continued that Highland Bank tries to leverage technology to support a more streamlined SBA workflow and consistently pre-screens clients to identify potential issues upfront.
Trocke said a common misconception that she runs into with clients when starting the SBA process is that it takes too long and is too difficult. She said this misunderstanding is one of the biggest challenges borrowers face when looking to obtain an SBA loan.
While it is a large obstacle, Trocke said the best way to overcome it is by making sure individuals choose an “SBA Preferred Lender,” which is an SBA-authorized bank that can approve loans in-house.
“A Preferred Lender is going to make the process quicker, smoother, easier and is really not a whole lot different than any sort of conventional financing,” Trocke said.
Storey added that Preferred Lenders have the authority to make credit decisions on behalf of the SBA, which streamlines the entire process.
“That’s really, really important for a company to understand because all of the information that we are requesting is getting us to the point of being able to make a credit decision,” Storey said. “The end result is higher approval rates for borrowers, and a quicker more streamlined process from beginning to end.”
Kolar and Rao, who both work with Highland Bank for their businesses’ loans, said a highlight of working with a Preferred Lender was the streamlined process, which made everything easier in the long run.
“Banks and business owners have to treat each other as partners,” Rao said. “A bank can’t do what the bank does without us and we can’t do what we do without banks. So finding the best bank partner that you can absolutely should be the top priority of every business owner. Then once you have one, never let them go.”
Another misconception Trocke has seen with clients is that pledging personal assets is an SBA loan-specific requirement, when, in actuality, that is not much different from conventional financing. Also, while pledging personal assets is a possibility for SBA loans, it is not always a requirement.
“That’s one of the challenges for a lot of small business owners when they seek financing is the thought that they may have to pledge their home as collateral sometimes or their personal assets,” Kinderman said. “But that’s what a lot of small business owners do when they get started. It’s part of taking that risk, that leap, and making an investment in themselves and in their company.”
Kinderman then zoomed out the conversation by asking what are signs that an individual is ready to buy a business and potentially start looking at loans.
Rao said it all comes down to the mindset.
While some people think of business ownership as purchasing an asset, Rao said there is a difference in mentality of an entrepreneur, which is that “buying a business can be just as entrepreneurial as starting one from scratch.”
Rao continued that while it can still work for someone to buy a business, keep it the same, and “tweak around the edges,” people that bring an entrepreneurial mindset to the table and are able to see growth potential and take on risk to make that happen often get more interesting opportunities.
“That’s where I think SBA is really great,” Rao said. “You do have this ability to have a longer time frame, less equity in, both the bank and you as the purchaser are pushing some of the risk onto the government. So you have this opportunity to kind of create partnership with your bank and actually get deals done and see the future of something in a different way than when we’re really trying to make sure all the cash flow statements look exactly the way that they need to or whatever the case is.”
Understanding risk in the SBA landscape is also crucial, according to Rao. It’s important for business owners to know the difference between fear and risk in the industry and how one can be afraid of a business outcome but that does not mean there is risk involved.
“Good entrepreneurs are the ones who understand what the real risks are, and then you do everything you can to mitigate them,” Rao said. “That’s exactly how banks are trying to think as well. Good banks are trying to make opportunities happen.”
Kolar added onto this topic, saying that before he considered buying CRDN, he immersed himself in the actual work to see if it was something he wanted to do every single day.
“One of the most important things and one of the first things is to just dive into the business,” Kolar said. “Shadow somebody. If you can, just get into the business, into the nitty gritty, deliver the clothes, work the machines, see if you could do it for a long time. That was one of the first things I did and it was for sure the best thing that I did.”
Kolar added that once an individual realizes they can do the job, they should start looking at the barriers to entry in that specific industry. He said one of the first things he looked at was industries that had slightly higher barriers to entry that required some expertise, since that improved the likelihood of the business being more secure.
“It makes the business a little bit more attractive and a little bit more secure if there are some barriers to entry,” Kolar said.
In addition to its status as an SBA Preferred Lender, Highland Bank stands out for two primary reasons, according to Hangge.
First, Highland Bank is known for its collaborative approach. Unlike institutions that operate within rigid credit parameters, the bank adopts a flexible process, actively seeking and incorporating customer feedback to structure the best deal for all parties involved.
This emphasis on collaboration also provides valuable learning opportunities for customers, especially those new to the financing process.
“Sometimes, customers request certain terms or structures that may not serve their business well in the long run. Our process involves understanding their reasoning, discussing the potential implications, and educating them on alternative approaches that may better support their future success,” Hangge explained. This advisory role is considered a crucial component of the bank’s service philosophy.
The second distinguishing factor is Highland Bank’s expedited decision-making process, high level of transparency, and the direct access clients have to senior leadership within the organization.
“Our clients have direct lines of communication to everyone, from the bank’s owner and CEO to the chief credit officer, ensuring clear and collaborative discussions whenever necessary,” Hangge noted.
This level of accessibility accelerates the lending process and enhances client confidence throughout the relationship.
Above all, Hangge emphasized the rewarding nature of working closely with a diverse group of business owners and entrepreneurs and supporting them as they pursue and achieve their business objectives.
“SBA lending is about people, the relationships that we have, and just helping dreams move forward,” Storey said. “So any way that we can do that efficiently, effectively is kind of the end goal.”
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