Many people have learned that they can work from home and are starting their own businesses. Every business owner or startup business needs more cash to start or grow their business. Personal loans from online lenders are a common way to get a home-based business started. However, success requires additional funding. Knowing how you can get ready for an SBA loan application is crucial to getting approved.
Banks are afraid of risky loans. If you haven’t been in business for years and have an excellent personal and business credit rating, banks don’t want your business. So, they turn down loans that online lenders are willing to fund. That is why the Small Business Administration (SBA) was created.
Before the SBA loans became available, the documentation for getting a business loan was horrible. The SBA has made loan applications much easier, but it is still a long and challenging process.
All Sba loans are simply business loans that have a guarantee that protects the lender if the loan becomes unpaid. Thus, the government takes some of the risk away from the lender. Which encourages the lender to lend to risky startup businesses and established businesses that banks would not otherwise lend to.
So, the SBA is not the lender – just a kind Uncle Sam that is helping the banks and the small businesses at the same time. Plus, the local and national economies are more prosperous too.
With the SBA protecting the lender from defaults for up 85% of the loan amount, lenders are more likely to lend to borrowers with poor credit. However, that means the SBA requires lots of documents and the process can take months to complete.
5 Easy Steps on How You Can Get Ready for an SBA Loan
1. Search for Online Lenders
Heritage Business Loans makes this easy by connecting you to a long list of lenders that are interested in providing SBA loans. By making a simple pre-application, applicable lenders will review the application and those that are interested will contact you. This usually provides the borrower with a few different loan options. This pre-application process will not harm your credit rating.
From your pre-application request the lenders will be able to determine which of the SBA loan programs would best suit your needs.
2. Get Loan Application Documents Ready
Once you have selected the online lender you wish to work with, you will need to provide a number of business documents. The lender will give you a checklist of forms to complete.
This will include a clear statement of how the money will be used. If there is more than one use for the funds, specify how much each use will require.
Also, be sure to include a loan repayment strategy as part of your SBA business loan application.
Your business and/or personal credit scores are important. If you can provide them yourself, that will speed the loan process up.
Some documents are required by the lender and others are required by the SBA. By making a pre-application the lender can instruct you as to what is needed.
3. Meet the Minimum Lender and SBA Loan Requirements
Each lender has their own loan requirements which are in addition to the SBA loan requirements. Each of the different SBA loan programs have their own set of qualification requirements. Your lender will be up to date on current requirements. You must make the pre-application request to the lender to know precisely what will be needed.
4. Complete All Your Documentation
In addition to a business plan, you will need business financial statements from your CPA. Also, a list of business assets and debts.
Financial records for at least three years are needed to show that the business will likely be able to repay the SBA loan. Be ready to provide current financial statements as the loan process proceeds.
This is a list of SBA requirements:
- Borrower’s information SBA form 1919
- Resumes of all business owners.
- Personal history and personal financial statements using SBA forms 912 and 413.
- A history of the business from startup to currently. Showing the challenges met and overcome, or still experiencing. Explain why the SBA loan will overcome existing and anticipated challenges.
- Current profit and loss statement and supplementary schedules from the last three fiscal years.
- One year projected financial statements of income and how that projected income will be obtained.
- A statement of who owns the business. Plus, a list of subsidiaries and business affiliates. Include any business relationship which you control or are legally connected to.
- Three years of personal and business tax returns for all owners of the business.
- Business license or certificate of doing business. If you have formed a corporation, be sure to use the corporate seal on the SBA loan application
- A statement of existing loans and previous loans. Including loans that have been applied for but have been turned down.
- Business location lease or a statement from your potential landlord of the terms and conditions.
Buying An Existing Business? You Need These Documents Too.
- The proposed Bill of Sale that includes all of the terms of the sale.
- Documents proving the injection of money or assets into the business.
- The sale price of the acquired business
- A list of all fixtures, furniture, inventory, equipment and machinery.
- All licensing agreements including franchise and jobber agreements.
- Three years of the business’s federal tax returns.
- Current profit and loss statements and balance sheet.
5. Be Prepared for the Oral Interview
The lender may require a review of your application with you. This is to get a better sense of how good a businessperson you really are. Do you understand what is in the SBA loan application and can explain it to the lender? Do you sound like you know your business inside out and how to keep your business successful? This interview is all about instilling additional confidence in the lender to grant final approval of the loan before the application is sent to the SBA for approval.
Expect to repeat exactly what is in the business plan and how your business projections were created. Project that the business plan is sound and reliable, and that you are fully capable of following that plan.
Knowing How You Can Get Ready for An SBA Loan Is Critical to Getting Approved.
Not knowing where to start or what to do, stops thousands of would-be business owners from getting established or growing their business. Money is needed to propel every business activity.
Getting an SBA loan is a challenge, but well worth the effort. However, if you are not yet ready to apply for an SBA loan there are other loan options available from online lenders.