Buying new equipment, starting a new franchise or refinancing a high-interest loan for your small business? SBA loans, with low APR and longer repayment terms are an attractive financing option that could help you develop your small business. However being approved for an SBA backed loan takes time and hard work. Stringent requirements suggest you may get refused. This is the reason why some businesses don’t bother applying.
However you can give your loan application an edge. Here’s how:
Clean Up Your Credit Score And Finances
Your financial history is an important factor in applying for an SBA loan. Do the whole thing you can to improve your credit rating and avoid financial mistakes that could be noticed as a warning signal to an SBA lender. For instance, maxing out your credit limit isn’t always a good idea if you want low-cost business financing. Usually, it’s good to keep your credit utilization under 30%. Additionally paying your bills on time is a must for an SBA borrower.
You will be requested to submit documents, such as tax returns and statistics of outstanding debt and bank statements. Put your financials in order before you apply for a loan. The procedure will move quickly, and you can get funded quickly. In case you’re having trouble getting started, hire an accountant to help you in paperwork.
SBA Loan Application Checklist
- Business Loan Application (SBA Form 4)
SBA Form 4 is the main part of SBA loans, and covers a wide range of regions. This Form requires business and personal information, and requires many attachments such as;
- Your personal information
- Number of workers
- Planned use of loan
- Previous federal debts
- Help obtained with your loan application
- Business debts
- Management staff
- Supporting documentation and statistics
- Guarantor signatures
- Lender’s Application For Guarantee Or Participation (SBA Form 4i)
The SBA Form 4i should be completed by your lender.
- Statement Of Personal History Form
SBA Form 912 is used to decide your reliability and examine whether you or your business partners have any illicit records. The details you give on the form can also be used as a background check tool. This Form is necessary for all principals, which comprises every general partner, proprietor, director, officer, managing LLC member, any owner with almost 20% or even more equity, any person take into service by the applicant to manage daily business operations, and loan guarantor.
- Personal Financial Statements
Comprehensive, signed balance sheet and P&L statements and last years of supplementary schedules required on current financial statements.
- Ownership Structure And Affiliations
Ownership structure and any affiliations such as concerns in which the applicant holds a controlling interest and other concerns that may be affiliated by stock possession, franchise, and proposed merger or otherwise with the loan applicant.
- Business Certifications & Licenses
Certifications of doing business (If a corporation, stamp corporate seal on SBA Form 4 section 12).
- Loan Application History
By means of law, the SBA won’t guarantee a loan if a business can get funds on logical terms from a bank or other private lending sources. The SBA loan applicant should provide proof that they have first sought private financing.
- Income Tax Returns Of Business
Provide signed federal income tax returns of business for last 3 years.
- Personal Tax Returns
Present signed copies of personal federal income tax returns for yourself and all principals in your business for the last 3 years.
Present resumes along with your business experience for yourself and all principals in your small business.
- Business Outline and History
Provide a succinct history of your small business and its concerns. Provide details of why the SBA loan is needed and how it’s going to help your small business. You can also include your business plan with it.
- Business Leases
If you will be leasing space to house your small business, you have to offer a copy of the lease or word from landlord giving terms of proposed lease.
Be An Expert To Your Small Business
In most instances, the SBA lender will look beyond the documents you submit to determine your loan eligibility. You have to reveal that you understand your business inside and out.
Be organized to give an explanation of your business plan and model for fulfillment, which includes the services or products, the marketplace and the competition, your service and sales process, and all different critical business elements. Be organized to answer questions on your credit report, your spending habits and your personal possessions and liabilities.
Look Around For The Best SBA Lender
SBA loans are issued by SBA backed lender and banks, however all SBA lenders are not the same. We suggest working with SBA preferred lending partner. Borrowers who work with a preferred lending partner could speed up their application process by weeks and increase their possibilities of being approved.