Is it that time to learn how to apply for an SBA loan? It is not that uncommon, nor it is always a sign of trouble that a business should eventually need a capital surge to sustain itself at some point. It is very common, however, for entrepreneurs to feel a bit overwhelmed at the thought of taking on what is likely to be considered a large amount of debt. Applying for an SBA loan can help alleviate some of that anxiety as the majority of lenders offer programs that are partially guaranteed by the governing agencies! Let the Empower Lend team explain just what to do when looking for how to apply for an SBA loan!
Do Your Homework!
Before diving right into the SBA loan application process, it is crucial for business owners to conduct their share of research regarding which SBA loan programs are available, what each program entails, and of course, which program is most appropriate for their business. Apart from the common 7(a) Loan, other types of SBA loan options may include microloans, disaster loans, and equipment financing loans.
Each type of loan has individual factors and eligibility requirements that you will want to be familiar with before making a decision. Understanding industry verbiage such as interest rate, term, limits and factor rate can help guide you in the SBA loan application process as well.
Be Prepared to Apply for an SBA Loan
SBA lenders are diligent when it comes to their approval process. You will quickly notice that, when compared to other types of business finance products, SBA loans come attached to more restrictive guidelines. In fact, there are some SBA loan programs that restrict funds to be allocated on real estate transactions.
Since SBA loans cater to the individual needs of small businesses, some comprehensive information about your business will be required to complete the application for funding. While most of the requested information is already contained in your business plan, you will want to gather information such as details about your services/products, ownership structure, time in business, and annual (or monthly) sales.
Get Familiar with the Documents
In order to complete the SBA loan process successfully, you will need to cross paths with the following documents at some point.
- The individual SBA loan applications from each lender
- Personal Statement from each business owner, which may include a personal financial history
- Profit & Loss Balance Sheet
- Revenue projections to accompany a minimum of (3) months bank statements
- Business contact and location information, including the Business Certificate & Federal Tax ID
- Some lenders may require your Business Tax Returns
- Budget Allocation for loan proceeds
An SBA loan, in essence, can be considered a form of revenue-based lending in some ways. While some loan programs are partially guaranteed by governing agencies, others may be offered directly from the Small Business Administration, and others are just designed to cater to the needs of small businesses and offered by private lenders rather than traditional banks.
With that being said, citing the future revenue projections for your business, that are supported by your previous balance statements, will be crucial to the loan approval process. Lenders will need reassurance and verified proof that the capital invested in your business will not only help your business grow but enable you the means to repay the loan as agreed.
A complete SBA loan application should be accompanied by all supporting documents for any financial claim made on the application including revenue, deposits, credit card statements and expenses. This may include a minimum of three months bank statements to up to three years of business financial records, in some cases.
After the application is submitted, you can expect to hear from your business funding specialist within a day or so to explain the individual steps which need to be taken for that specific lender. Your Empower Lend Funding Coach will help you decide which loans meet your needs while explaining the difference in collateral used to secure each loan product.
How to Apply for an SBA Loan
Business owners that utilize private lenders to secure SBA loan capital may find that they can access proceeds much timelier than when working with traditional banks. Typically, loan proceeds can be accessed within a mere 48 hours from approval, in most cases.
To ensure you experience the quickest funding times, you should double check that all information is completed and accurate on the initial loan application. Remember – clarity, integrity, and consistency are the hallmarks of a great investment for SBA loan lenders. Showcasing your business in the most favorable light on the application can increase your chances of approval tremendously.
CLICK HERE to learn more about how to apply for an SBA loan from Empower Lend.