4 Steps to Take When Applying for an SBA Loan
The Small Business Administration works to make it easier for companies to obtain loans. This is vital for entrepreneurs, as new companies often do not have the credit history, collateral or years in business to qualify for many types of loans. The SBA has certain criteria in place regarding which companies are eligible for loans. To improve the chances of getting approved, entrepreneurs should ensure they have everything they need.
- Research the Basics
The SBA backs loans, which reduces the risk lenders take on when providing funds to small businesses. However, each lender or bank has its own set of requirements in place for granting loans. The types of SBA loans available vary based on the industry, lending institution and what the funds will be used for. Entrepreneurs should understand exactly what type of loan is ideal for them and what requirements must be met during the application process.
- Find a Lender
Because every lender and bank are different, it is important for entrepreneurs to research multiple institutions before applying for a loan. Not all lenders give out SBA-backed loans, while others are SBA Preferred Lenders and can process loans more quickly. Visit the lending institutions’ websites and carefully read through the terms and conditions presented for each type of loan. Evaluate any testimonials or reviews posted online to ensure the lender has a good reputation. If possible, speak with people in the industry about their experiences and obtain referrals.
- Organize the Paperwork
Entrepreneurs may be required to provide documentation regarding financial projections, financial documents for previous years, or other relevant information regarding their companies’ creditworthiness. The loan application should be completed professionally, with each section filled out with the right information. Failing to properly complete or provide the required paperwork can result in delays or rejections.
- Prepare for the Interview Process
The approval process often involves an interview, whether in person or over the phone. No matter how the interview takes place, entrepreneurs should remember to remain professional and courteous throughout the interview. Have all the information that may be needed, such as the business plan and financial statements, in order to quickly and accurately answer any questions. Be prepared to discuss the repayment plan and go over the terms of the loan.
Getting SBA loans does not happen overnight. While the approval process can be lengthy, favorable terms can make the process worthwhile for entrepreneurs who are still establishing their companies.