How to Get Through the SBA Loan Process
Most business owners need to take out a loan eventually, but not every person will qualify for financing from a traditional lender.
If you don’t have collateral or years of successful business transactions behind you, you may want to consider applying for SBA loans instead. Backed by the Small Business Administration, these loans make it easier for the banks to take risks, and therefore, for you to receive financing.
Deciding Which One Is Right for You
The Small Business Administration offers several different types of loan programs, which means you’ll need to decide which type may be best for your business before you apply. The SBA’s online search tool allows you to search for and compare types of loans based on your business profile, growth plans, need for financing and more. After you narrow down your choices, your district SBA office can introduce you to the right lenders in your area.
Preparing for Your Meeting
When you apply for SBA loans, you’ll need to meet with your lenders. The more prepared you are for your meeting, the more likely you are to be approved. While guidelines vary depending on the type of loan, most lenders determine creditworthiness based on your current credit relationships and whether they are in good standing, your current debt-to-worth ratio and your projected cash flow. Working capital and collateral may be considered as well. Don’t forget to bring proof that you’re in good standing with the IRS and have a strong business plan for at least the next three years.
Completing the Application
When filling out the loan application, ensure you complete every portion. An incomplete form can cause delays in the approval and funding process. You can learn about the forms you’ll need to complete and the background information you’ll need to provide beforehand to ensure you have everything you need. In fact, the SBA even has a free training course online to help people prepare for the application process.
Keep in mind that applying for an SBA loan is not a quick process, so you cannot expect to receive funding within a matter of days or even weeks. Once you decide on the type of loan and complete the application process, the bank you applied through can take several months to make a decision. For this reason, SBA loans are a good choice for businesses that want to expand or have other long-term plans but not for those who are in financial dire straits.