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A Complete Guide to SBA Loan Qualifications for 2019

SBA loan qualifications

If you need a loan for your business, now is the time to apply. The approval rate for small business loans has increased dramatically — in fact, it’s the highest its been since the 2008 recession.

Approval rates may be up for small business loans, but that doesn’t exactly mean that it’s easy to get approved.

There are a lot of hoops you have to jump through, especially if you’re interested in applying for a Small Business Administration loan (also known as an SBA loan).

Read on to learn everything you need to know about SBA loan qualifications to make sure your application gets approved.

What are SBA Loans?

An SBA loan is a type of small business loan. What separates SBA loans from other types of business loans is the fact that they are partially guaranteed by the U.S. government — specifically, by the Small Business Administration.

Some people think that the SBA actually loans money to small businesses, but that’s not actually the case. Instead, the SBA works with certain approved banks and credit unions.

The SBA guarantees a percentage of the loans these banks and credits unions provide to small businesses. This means that, if you default on the loan, the SBA will back up a portion of the total loan amount. 

The amount of the loan that the SBA guarantees can vary, but it can be as much as 85 percent. The SBA guarantee helps to motivate lenders to work with small businesses and give them the funding they need to grow their business or get it off the ground.

Types of SBA Loans

There are a few different types of SBA loans, including the following:

  • SBA 7(a) loans, which give you access to up to $5.5 million in cash with repayment terms of up to seven years
  • CDC/504 loans, which are meant to be used for big purchases like real estate and machinery
  • SBA microloans, which are smaller loans (maximum of $50,000) and have repayment terms of up to six years

Of these loans, SBA 7(a) loans are the most popular. They’re the most flexible, too.

SBA Loan Benefits

There are lots of perks that come with taking out an SBA loan. Some of the greatest benefits include:

  • Lower interest rates
  • Access to more capital
  • Better repayment terms and more flexibility
  • Lower downpayments

SBA loans give you more flexibility in the way you spend the loan, too.

When you take out an SBA loan, you also gain access to a ton of SBA resources that will help you learn more about running your business, handling finances in an appropriate way, and making sure you can pay back your loan on time.

SBA Loan Qualifications

An SBA loan for your business sounds pretty great, right? If you want to apply for one and increase your likelihood of getting approved, you’ll need to make sure you meet all the qualifications that the SBA has laid out.

The following are some essential qualifications every SBA loan applicant must meet:

Basic Eligibility Requirements

First, you need to make sure you meet all the basic eligibility requirements for this type of loan. These requirements include:

  • Being a registered, for-profit business
  • Being located and operated in the United States
  • Having invested your own time and/or money into the business
  • Having exhausted all other business financing options

You’ll need to meet the qualifications for being a “small” business, too. A business is considered small based on the number of people it employes, the revenue it brings in relative to other businesses in the industry, or its total net worth. 

Necessary Documentation

You’ll need to gather several different documents before you can apply for an SBA loan, too, including the following:

  • Your driver’s license
  • A voided business check
  • Copies of your business bank statements
  • Copies of your balance sheet
  • Copies of your profit & loss statements
  • Copies of your business tax returns
  • Copies of your personal tax returns
  • A copy of your business plan
  • A copy of your business debt schedule

You’ll need to provide legal documents, too. This includes copies of business licenses, franchise agreements, and your articles of incorporation.

Collateral

Sometimes, you can increase your chances of getting approved if you can provide collateral to back up your loan. Collateral could be anything, but common types include real estate and pieces of equipment. 

High Business Credit Score

Fifty percent of small and mid-sized business owners don’t even know that they have a business credit score!

Your business credit score has a huge impact on your chances of getting approved for an SBA loan, though.

Be sure to check your credit report and try to improve your credit score before you apply.

High Personal Credit Score

When you apply for an SBA loan, the lender will likely look at your personal credit score, too. The higher it is, the better your chances of approval will be. This is especially important if your business hasn’t been operating for a very long time.

Personal Guarantee

Finally, you may also need a personal guarantee. A personal guarantee is a document that says you will personally pay back the loan if your business fails and lacks adequate funds to repay its debts.

If your collateral does not cover the remainder of the loan that you owe, your lender might seize personal assets like your car, money from your personal bank accounts, or even your house.

Apply for an SBA Loan

Now that you know more about SBA loans and SBA loan qualifications, are you ready to apply and get the funding your business needs? 

If you’re interested in applying for an SBA loan, consider applying through us at Signature Bank of Georgia.

We’re a preferred SBA lender, so we can help you get approved much faster than other lenders.

It’s easy for you to apply online for an SBA loan. We’ll get back to you as soon as possible and let you know if you’re approved.

If you’re not quite ready for the application process yet, we also have lots of educational resources to help you choose the best type of loan for your needs. 

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