SBA Loan Applications: How To Do It Successfully

During the 2020 fiscal year, the Small Business Administration funded almost nine million loans to small businesses in the U.S. These loans help fuel economic recovery and make it easier for small businesses to meet their goals and expand their operations.

You must go through the SBA loan application process if your business could benefit from a loan. Let’s look at what you need for SBA loan applications and how to apply for a loan successfully.

How To Get An SBA Loan?

SBA loan applications include all the underwriting information that the SBA and the lending institution need. This makes the application process similar to applying to both institutions at once.

An SBA loan application is time-consuming and detailed because both the SBA and the lender have high borrowing standards. It’s important that you meet all eligibility requirements and correctly complete the application.

Eligibility Requirements For SBA Loan Applications

US Small Business Administration loans are competitive. You and your business need to have a strong credit report and finances. You also need to meet the requirements for the loan program.

Different loan programs have different specific requirements. However, the SBA does have some minimum eligibility guidelines, including:

• Meet the SBA’s definition of a small business
• Operate in an eligible industry for profit
• Propose to do business in or be operating and located in the U.S. or territories
• Have personal finances and time invested
• Have attempted and cannot obtain funding from another lender
• No current or previous defaults or delinquencies on government loans

Lenders will also usually have similar minimum requirements. Common lender requirements include a personal credit score of at least 620-640.

Your business should be at least two years old, though newer businesses may be able to qualify for certain loans. Your annual revenue should be at least $100,000.

Choose Your Loan Program And Lender

Identifying the loan program that matches your needs is key to Small Business Administration loan success. The SBA 7(a) program is available for general business financing.

You can use the SBA 504/CDC program to finance real estate, construction, and equipment expenses. SBA microloans can be used for many things but are all under $50,000. An SBA disaster loan application may be helpful if a declared disaster impacted you.

After choosing your loan program, you may work with a local bank or a non-profit as your lender. Some lenders also offer online applications.

Complete Your Application

You will need to include basic background information about your business and you. Also, include a loan request letter that states your desired loan amount and how you will use the funds. You need a business plan that is very detailed and includes your plans for the loan.

The SBA and your lender will require several financial statements, including balance sheets, tax returns, and credit reports. Depending on your legal entity, they will also ask for your business legal documents.

Finally, you must submit the SBA forms specific to your loan program. When submitting your loan package, work with your lender to ensure you include everything. Then, you just must wait to hear back about the loan decision.

4 Things To Remember Before Taking SBA Loan

To grow your business, you would require resources to make it possible. You can get these resources through funds, which are not always easily available for small businesses.

This is where an SBA loan comes in to help small business owners with cash flow to grow their business. However, before applying for an SBA loan, you might want to remember these four things. Keep reading to learn what these four things are.

Identify Loan Purpose

Firstly, you need to understand why you need the SBA loan and specifically make this purpose clear to your lender. This will ensure your lenders provide the funds required to execute your end goal.

Your business’s overall growth strategy should include how you wish to use the funds to reach your business goal and how much return you will get with the loaned money. So, your lenders can be assured of their funds’ returns with interest.

When explained to lenders, a well-articulated plan can speed up your loan pre-approval and underwriting processes.

Related: Reasons Your Small Business Loan Was Denied

Understand Eligibility Requirements

Secondly, you must understand SBA eligibility before you apply for a loan. These are the five general categories that SBA loan applicants must follow.

• You must have a guarantor who is a legal citizen or permanent resident of the U.S.
• Your business profits must be less than five million dollars
• Furthermore, your business industry must be eligible to provide you with an SBA loan
• Next, your loan amount cannot exceed five million dollars
• Lastly, how do you use your proceeds to grow your business

Prepare Your Documents 

Thirdly, before you take any loan from any institution, you must have all your documents. For an SBA loan application, you need to provide your business documents to verify your loan application.

From verifying your eligibility for the loan to correcting business documents, lenders require a list of documents to approve your SBA loan application. Some documents you must provide for your loan are listed below.

• Personal financial statement of your guarantors
• Immediate business financial statements
• Your business debt schedule
• Personal tax returns, along with tax returns on your business

Find The Right Lender 

Lastly, you should find the right lender to provide you with the SBA loan. Whether you get the loan from your local or large national banks, you must choose the right loan provider to take your SBA loan.

Additionally, you must understand what type of loans you require, like online lenders, banks, or credit unions. Furthermore, you must select preferred, delegated, or non-delegated SBA lenders from whom to take your loan.

You can loan your amount from potential investors through online SBA loan markets. Additionally, you can take a loan from a local SBA office or small business development center (SBDC). Whatever your choice, choosing the right lender for your loan will smoothen your loan experience.

Successfully Apply For Your SBA Loan

SBA loan applications are detailed, time-consuming, and sometimes confusing. But, by carefully double-checking each step, you can get the funding you need for your small business.

If you find this article helpful, read our other business articles too.

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