Steps for Preparing an SBA Loan Package
SBA loans are constantly classified as the most affordable loan options for small businesses. This is due to their low interests, long term duration and because the federal government backs them. They are, therefore, the most sought loan options by entrepreneurs.
Getting these loans is, however, not an easy task for small business owners. SBA works with trusted intermediary lenders, which means that a small business owner must not only be approved by SBA but by the intermediary lender as well.
Are you wondering how you could prepare for an SBA loan package? Sit back, relax, and be ready to get educated.
Below are items that you should include in your SBA loan package so that both institutions will approve the working capital loan or your small business loan.
Elements That Comprise an SBA Loan Package
Heritage Financing advises that your loan package contain the following definite items:
Statement of the Purpose
The SBA personal loan agency near you has specific recommendations of what your statement of purpose should comprise:
- Details pertaining your loan request
- Well drafted description of your business plan
- An account on how your business will be positively affected by the loan
- A statement on how you, as the business owner, plan to make your business succeed
All these details are necessary for SBA to be sure you have invested personal time and money towards your business for them to grant you a loan.
You don’t necessarily have to lay out the entire business plan here. The lender only needs necessary excerpts from the business plan. They want to be sure that you can pay back their money.
What should you include in your business plan?
- A description of the subject business
- A future prediction of your business
- Information about the products or services you’re offering
- Organization and management of your business
Every lender is interested in if you are capable of repaying their loan. Financial Statements are therefore necessary for any loan package.
With this in mind, you’ll want to show them your capability to repay their loan by including the items below:
- Cash income and expense statements
- Balance sheets – business net worth and value
- Income Statements – profits and loss reports
- Personal Monetary Reports – individual net worth, including debts
With that knowledge on what to include in an SBA package, let’s look at how you can prepare one.
Getting an SBA Loan Package Ready
Before you submit your package to a personal loan agency near you, below are a few recommended steps that will raise the chances of your loan approval.
Determine Your Eligibility
This is the obvious step; that you must qualify for the loan if you want the loan. Generally, SBA demands that you meet these rules:
- Have a 680+ FICO credit score – for all corporate owners
- Be in business for two or more years
- Have a profitable business
- No loan defaults or debt obligations
The following additional requirements are needed for an SBA 7(a) loan.
- Must be a small business – 500 or less employees
- Be in a legitimate industry
- Business must be profitable and within the U.S
- Be in line with SBA rules
Identify Your Explicit Financial Needs
Before formulating and submitting your SBA loan package, there is need to know exactly how you plan on using that money. From their website, SBA specifies that they don’t give 100% financing.
The loan institution, as well as lenders, are interested in funding your small venture, and son need guarantee that you can refund it. Lenders will be in a better position to fund you if you specify need for that loan.
Research About the Available Loan Options
There are various available loan options for specific types of ventures. For instance, if you need $50,000 or less for your start up, SBA microloan is best for you. You otherwise won’t be eligible for a 7(a) loan, which requires your business to be in operation for more than 2 years.
Knowing the available options gets you at a better chance of applying for a loan for which you are eligible.
Organize Your Credentials
After identifying a loan, you qualify for, it’s time to put your documents in order. You need your statement of purpose, business plan and financial statements well organised for approval.
Fill Out the Necessary SBA Forms
Before they give you a loan, the SBA demands that you fill and sign these forms:
- SBA Form 1919
- SBA Form 912
- SBA Form 413
- SBA Form 159
With all these forms filled out and your supporting documents in order, it’s time for your package to be reviewed by the lender.
Prepare A Draft
Put the forms above and your documents together, with everything clearly documented then present them to the lender (bank), SBA or business advisor for assessment.
After your draft is reviewed, you’re now ready to submit it for approval so you can receive an SBA loan.