The SBA offers credit to the small business people through approved lenders in the United States of America. These loans present a special chance for business people to arrange some funds which can hardly be arranged by the use of financial services. Any entrepreneur who has prepared all necessary documents and followed the correct procedure has a potential for success in obtaining SBA loan.
Looking at this guide, you will be taken through all the aspects of applying for an SBA loan, right from whether you qualify for the loan to the available loan types and the procedures you need to follow to launch your application. And that means if you contemplate expanding your operation, consider the advantages of an SBA loan.
Determine Your Eligibility
To help you avoid making a mistake it is crucial to know the statutory requirements of SBA loans concerning the business and the applicant. First of all, your business must meet the SBA’s size standards, which means that it has to be small by industry standards.
Second, look at your credit history as an individual, or as a borrower in case you sign a guarantor loan agreement. Lenders will generally consider borrowers with credit score above 680, although some of them accept borrowers with credit score between 620. They will also review your personal and business tax returns; bank statements; and all other financial or fiscal statements in order to determine levels of solvency.
Finally, you must participate in the day to day running of the business and show that you understand the financial situation of the business. The SBA wants to make sure that you are vested in the success of your venture and that getting a loan is good for your business.
Research Your Loan Options
Having assessed whether you are eligible for SBA loans, it is now time that you compare SBA loans which are available for you. The most common types of SBA loans include:
7(a)Loan Program: This is SBA’s mainvoice loan program that delivers up to $5 million across a range of business uses including working capital, equipment acquisitions and debt refinancing.
CDC/504 Loan Program: The loan is created for buying fixed assets, for example, land, buildings, or equipment, and uses a long-term, fixed interest rate financing through the SBA, an CDC, as well as, a contributing financial institution.
Microloan Program: This program offer favorable business loans of up to $50,000 for small business and not-for-profit child care centers. Micro loans are offered by nonprofit micro lending institutions and are normally used where necessary for working capital, stocks, or even fixtures.
Disaster Loan Program: When a disaster is declared, SBA provides its differentiated products: specifically, the EIDLs and PDLs to the small business entities.
By this, you can go for the loan as per your business requirements, your desired loan amount and loan terms of repayment.
Prepare Your Loan Package
So, in order to avoid rejection of the application, you should be very prepared beforehand, and all the documents necessary for granting the loan should be ready. Key documents you’ll need include:
Personal and Business Tax Returns: The latest federal tax returns for persons and businesses seeking loans must be produced by the lenders.
Financial Statements: Enclose your business’ balance sheet, income statement, statement of cash flows and whichever other financial statements for the last three financial years.
Personal Financial Statements: Some lenders may ask you to fill in the personal financial statement to determine their credit worthiness.
Business Plan: A clear and detailed business proposal is a must have document in case of seeking funding. It should include information about your business background, vision, scope of activities, offered goods and services, and target consumers, marketing plans, infrastructure, facilities, and monetary expectations.
Collateral: Most of the lenders will need a form of security in order to be willing to lend the money. This may be business equipment, stock, accounts receivable or even personal property.
Personal Guarantees: Lenders can also ask for a personal guarantee, that makes you liable to pay off the loan in cases where your business is unable to.
Choose the Right Lender
Finally, you will have to find an SBA-approved loan lender for you to be able to access it for the loan. However, choice may be offered to choose more lenders, the ideal way is to contact one of the local banks or credit unions which specialize in SBA lending.
It is important therefore to dig out some information on the specific lender being involved, the time it takes to process the loan and the interest rates charged. You must also be able to recommend other small businesses or you can go online to the SBA’s list of approved lenders.
Submit Your Application
Now, after you have prepared all of the above documents, it’s time to compile your full loan package and present to your preferred lender. As for the loan program, you may apply online, in a branch or send the application completed by mail.
Besides the documents listed above, your lender will need a filled SBA loan application form which is available on the website of the SBA. Never leave any questions unanswered, nor give incomplete or wrong answers, because this will take another few days to go through approval.
Wait for Approval
Once you have provided your loan application, the lender takes time to consider your loan package. This process takes may take a few weeks to several months depending on your application and the prevailing backlog for SBA loans.
It’s also highly possible that you may be required to submit further information and or supporting documents for this particular process at this time. Stay on your toes in relation to any request your lender may have regarding the process and about the progress that is being made.
Closing and Funding
If the loan is processed, in addition to signing of the loan papers, the terms of collateral may also be agreed upon. Subsequently, the funds will then be requested to be released to your business you will be normally expected to do so within one month.
Now that you have your SBA loan, you can finally operate and expand your business, purchase new equipment, or eliminate costly debts. Stop sometime to monitor your progress and do your best that you are in charge of your loan to get the best result.
Conclusion
An SBA loan is never easy to acquire, but identifying the process, preparing the documents and having proper guidance makes the journey much easier for any small business. By following all that is stated in this guide you’ll definitely get your funding to grow your business.
When working on the loan, always try to work with your lender and make sure you keep them informed of your financial status. Everything is possible, if only one tries harder enough and so, it is possible to achieve your vision for small business growth.
