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SBA Loan Application Walkthrough: How to Get a Business Loan

SBA loan application

More than 80 percent of business loan applicants are rejected by their bank. Rejection has become more common in the last few years. Lenders have become less willing to extend financing to small business owners.

If this story sounds familiar to you as a business owner, you might be wondering what other options you have. The good news is that you may still be able to get a traditional business loan.

The Small Business Administration backs loans for small business owners. Their guarantees reassure lenders like banks.

We’ll walk you through the specifics of preparing an SBA loan application. With this information in hand, you’ll be well on your way to getting the financing you need.

Match Needs to an SBA Program

The very first step in getting a business loan is determining what you need. How much money do you need? What will you use it for?

You should also think about loan terms. What rate of interest can the business afford to pay? How large could your monthly payments be before they negatively affected the business?

Interest rate, loan amount, and the length of time you have to pay the loan back affect how big those payments are.

Once you’ve looked at your needs, you should visit sba.gov to review their different loan programs. The SBA runs 13 business loan programs. Some of the most popular are:

  • SBA 7(a) Loan Program
  • SBA CDC/504 Loan Program
  • SBA Microloans

There are also programs for businesses that need to recover from disasters. Other programs extend loans to business owners involved in exports.

Some programs, like the microloans and 7(a) Small Loans, are designed to meet specific needs. Others help certain people, such as the Veteran’s Advantage program.

Determine Your Eligibility

Once you’ve matched at least one SBA loan program to your financing needs, it’s time to double-check the criteria. Do you meet the requirements for the loan?

This can save both you and the people reviewing your application a lot of time. For example, if you’re not a veteran, you won’t qualify for a Veteran’s Advantage loan. If you don’t export products, you can’t apply for a loan program designed for exporters.

In some cases, it’s not as easy to determine if you meet the criteria for a loan. The standard 7(a) Loan Program is popular because it covers the widest range of businesses. You still need to check and make sure you could qualify under this program.

Choose a Lender

Application requirements vary between lenders. You’ll have to choose who you’re applying to before you put together your documents.

Review the different SBA lenders in your area. Make sure they offer the type of loan you want. You’ll also want to make sure they can offer you favorable terms and interest rates.

Although the SBA governs the programs, lenders may have some leeway in deciding terms. Most SBA loans have interest rates lower than the market, but rates can still vary between lenders.

So will term lengths. Some SBA loans will be repaid in five years, while other may take 25 years. This can happen even with loans issued under the same program.

One of the most important things to do when you’re comparing lenders is to test their customer service. There will be differences between the loan terms, but you want to work with a lender who provides the right support.

Preparing the SBA Loan Application

Now comes the tricky part. You’ll actually start preparing your SBA loan application.

Remember that requirements will vary by lender and SBA program. For the most part, you can count on needing to submit a good deal of paperwork for review.

For most loans, you’ll be asked for some combination of the following:

  • Resumes for business owners and partners
  • Credit reports for the business and owners
  • Tax returns
  • Financial statements for the business, like a balance sheet and cash flow statement
  • Legal documents, such as business licenses

You’ll also need to submit the loan request itself and basic information about your business. You may also be required to submit proof of collateral. You won’t need collateral for every loan backed by the SBA.

Your Business Plan

If you’ve already applied for a business loan, you know submitting a business plan is part of the process.

You may not be asked for one, but submitting an SBA business plan is a wise idea. Your plan should provide an outline for the business, including where you want to grow in the future.

This is your opportunity to show the lender and the SBA investing in your business is the right move. Use the business plan to show them what their funding will help you accomplish.

If you don’t include a business plan, you may want to include excerpts or a statement of purpose.

Tips for Successful Applications

As you pull together your SBA application, keep these tips in mind. First, you should be brief and to the point. The lender shouldn’t have to dig for your purpose or projections.

Make sure your projections are realistic and well-supported. If you say the business will earn $5 million in profit, you need to provide the support for this statement.

Tell lenders how they will get their money back. Lending money is a huge risk for them, so they want to be assured they can count on you to repay the loan.

Finally, be sure to proofread or have someone else review. A document with poor spelling or grammar may make the lender wonder how careful you’ll be with their money.

Remember that getting approved for an SBA loan takes time. The lender and the SBA both have to review your application. Be patient.

Get a Hand with Your Loan Package

Preparing an SBA loan application takes time. If you need a helping hand, don’t be afraid to reach out to the experts.

Are you still looking for the right lender for your SBA loan? Discover our options. We could help you get the financing you need to grow your business.

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