SBA Loans for Small Businesses are great low-cost long term capital for your business growth and expansion.
As a small business owner, you might have heard of SBA loans and wondered if it’s right for you.
Learn about the SBA, SBA loans, how to get approved and how to avoid the pitfalls of the loan process.
Any missing or incomplete documentation could slow down the process or cause the rejection of your SBA loan application altogether.
Finding A Local Lender: Even though SBA guarantees your loan, you still need to find a local lender, e.g. a bank, to kick-start the process.You can visit your local SBA District Office to help identify a few SBA lenders in your area that may be a good fit for you.
Different banks offer different terms and rates, even for SBA loans, so you may need to speak to quite a few banks in order to find the best option for your unique business needs.
Application: Next, you need to complete your SBA loan application and prepare for your meeting with the bank.
Factors Considered By The Bank: Debt payments, cash flow projections, debt-to-worth ratio, good standing with your state treasury and the IRS, collateral, and working capital. Supporting documentation is critical.
Business Plan: Part of the review process by the bank includes having a well prepared business plan with at least three years of financial projections, an overview of how you plan to utilize the loan funds, and a solid understanding of your industry and market.
Spending all the time and energy to put together a lengthy loan application only to be rejected can be a very frustrating and discouraging experience, not to mention the time lost as you have to start the process all over again.
Make sure you do your due diligence to avoid the following pitfalls:
Incomplete Documentation: Make sure you gather all the required documentations before you submit your application. Any missing item could delay your application process or disqualify your application.
Errors In The Application: The application form requires in-depth information and can be complicated. Errors, even made unintentionally, can cause the bank to dismiss your application.
Failure To Adhere To Rules And Regulations: The SBA has over 400 pages of rules and regulations for its loan programs so make sure you don’t overlook these important guidelines.
Applying For The Wrong Loan Program: The SBA offers a variety of loan programs so make sure you pick the best option for your unique business needs.
Choosing The Wrong Lender: If you don’t take the time to shop around and speak to a good number of banks or financial institutions, you may not get the best rate or payment terms for your loan.
If your application is denied by one bank, you will have to start the process over again so make sure you follow all the guidelines and submit all required materials.