During the 2020 fiscal year, the Small Business Administration funded almost nine million loans to small businesses in the US. These loans help fuel economic recovery and make it easier for small businesses to meet their goals and expand their operations.
If your business could benefit from a loan, you’ll need to go through the SBA loan application process. Let’s take a look at what you need for SBA loan applications and how you can successfully apply for a loan.
How to Get an SBA Loan
SBA loan applications include all of the underwriting information that is needed by both the SBA and the lending institution. This makes the application process similar to applying to both institutions at once.
Because both the SBA and the lender have high borrowing standards, an SBA loan application is time-consuming and detailed. It’s very important that you meet all of the 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 US 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 in Small Business Administration loan success. The SBA 7(a) program is available for general business financing.
The SBA 504/CDC program can be used for financing 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 you were impacted by a declared disaster.
After you choose your loan program, you may choose to 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 a number of financial statements including balance sheets, tax returns, and credit reports. They will also ask for your business legal documents, which will vary depending on your legal entity.
Finally, you will need to submit the SBA forms specific to your loan program. When submitting your loan package, work with your lender to make sure you include everything. Then, you just have to wait to hear back about the loan decision.
Successfully Apply For Your SBA Loan
SBA loan applications are detailed, time-consuming, and at times confusing. But, by being very careful and double-checking each step, you can have success getting the funding you need for your small business.
If you found this article helpful, read our other business articles too.