The whole process of applying and securing a loan from the SBA can be a daunting and tedious one for prospective loan borrowers. Everything from understanding how the SBA loan process works, to where to go for it, extending to how to go about it, and right down to everything in-between, a lot of confusions can come in the way of persons who want to walk down this path to securing small business loans from the SBA.
In this article, we have carefully provided you with in-depth info on the A-Z of the SBA loan process. Your SBA loan application starts with helping yourself with this detailed SBA loan guide.
For ease of understanding, we are going to divide this article into the following basic 7 steps to getting an SBA loan:
- Business status
- Fitting SBA program
- Follow-up assessment
- Final assistance
Now, let’s have a detailed look at them.
The first thing you would want to know is if you meet the SBA loan requirements. This lets you know at a glance whether to save your time and energy for other needfuls than wasting valuable resources on something you don’t even have a shot at.
So, what are the SBA loan requirements, and how do you measure up? Check out the following list.
- Perhaps, the foremost consideration for the SBA loan requirements is to check your business’s jurisdiction. Typically, the business for which you want a loan must be based in the United States and its territories. That instantly eliminates those outside this category and saves their precious time.
- The business must be for-profit, and must not be engaged in any illegal activities.
- Next, your business staff size should not exceed 500 (can be flexible).
- Your business’s net annual income should not exceed 5 million USD.
- The business’s net worth must not be above 15 million USD.
- Most businesses in the lending and real estate niches don’t qualify for most SBA programs.
- Your credit card report must be satisfactory. How so? Typically, the acceptable minimum credit card score is 680. That’s, of course, a first consideration in the credit card requirement before you are even considered any further. If your credit card score meets the number, a lender will evaluate your credit history fully to see if it meets, yet, other requirements. What could disqualify you? Bankruptcies and defaults on previous loans. While negative reports on your credit card will not receive a thumbs-up, they may not hamper your chances of securing an SBA loan if you provide a credible explanation for such negative reports.
We strongly advise that you find ways to improve your credit authority before you tender your application.
For further SBA loan requirements, you can check with their official website at www.sba7a.loans.
- Business status
We suggest you have a thorough understanding of where your business stands before you make a move for the SBA loan application. Doing this gives you a better understanding of how to go about the whole loan process—the right SBA loan program for your unique situation and how to follow-up with SBA lender questions and requirements.
You might want to review your business plans, culture, and elements, ensuring that it meets the SBA loan specifications. The SBA organization and the lender will look through this, and you will be at the mercy of their judgment. You will have to find the time to create a solid and compelling business plan if you must optimize your chances of SBA loan consideration. Lenders don’t want to lose their money; they want to be sure you are the right candidate for an SBA loan.
- Fitting SBA program
SBA offers several different loan programs, so we suggest you take the time to go through all of them and decide which is the right program for your particular situation. Each program is different in its offerings, terms and conditions. There are the SBA 7(a) loans, Microloans, 504 Loans, and the Disaster Loans. Each is peculiar in rate, loan amounts, and terms. Find out which will work best for you and opt for it.
We’ve come to the real stuff—paperwork! Truth be told, the whole SBA loan application is a long and daunting one. But you don’t need to worry, as you will be guided through the entire process. Typically, the application process involves a lot of documentation—from/for the government, the SBA, the lender and you! All documents must be genuine and work together towards securing you an SBA loan (if you merit it).
So, how can you go about the SBA loan application?
The first place you may want to check is right here on the internet. Go to their official website and fill out such information as the following:
- Your personal data
- Authentication for your business
- Business certificates
- Business final reports/records
- At least 2 years of business/personal tax returns
- Past loan history (if any)
- Documentation of accounts such as savings account, retirement account, other investments, etc.
That’s all? Not at all!
You will need to validate yourself with the law. How so? You will be required to provide the following legal documents where they apply to you.
- Business licenses
- Articles of organization
- Lawsuit papers
- Judgments or bankruptcies
- Franchise agreements
- Third party contracts
- Commercial lease agreements, among others.
You may want to check out specific documentation required by the SBA. They include but are not limited to the following:
- Lenders’ credit memorandum
- Draft authorization
- Business and affiliates financial statements
- Supporting documents, etc.
Plus, you will fill out the forms below.
- SBA Form 912: a statement of your personal history, which includes any past criminal reports.
- SBA Form 1919: a form from the borrower, which includes questions and answers for anyone with a 20% stake in your company.
- Form 413 serves nearly the same purpose as Form 1919, but differs slightly, in that it involves anyone with “at least” 20% percent stake in your company.
There are even more papers to handle in the entire SBA loan process. We have just listed some. However, this shouldn’t unnerve or discourage you from applying for the loan, as it’s typically like every other serious official process where a lot of protocols and documentation are involved.
Okay, you’ve got all your papers right and ready; it’s time to find an SBA lender. There are plenty of SBA lenders you can meet out there, but you would want to meet an experienced SBA lender. Luckily for loan seekers, the SBA has marked out some lenders as special. These are the SBA Preferred Lenders. The SBA has vested these select few with authority to make final credit decisions.
Bear in mind that SBA does not give loans directly; rather, they have agents who act on their behalf. These agents come in the form of private lenders, banks, credit unions, among others.
Generally, lenders are willing to give out loans to deserving small businesses, since the SBA promises them 50% and above from loan proceeds.
But where can one find an SBA lender? You may want to go about it in the following ways.
- SBA website: The SBA Match Lender is a powerful tool you can use to find certified SBA lenders online. Just fill out some required personal data, and this amazing referral tool will link you up with an approved SBA lender that will serve your SBA loan interest.
- SmartBiz: This helpful online loan tool can connect you with the right loan agents from SBA and similar loan services.
- Other resources: You can check out any trusted financial firm, tell them the kind of SBA loan program you seek and ask for referrals to the right SBA lender.
- Follow-up assessment
After submitting your SBA loan application to an SBA loan agency, the next move is to sit back and expect approval. Typically, this will involve several weeks, anywhere between two to three weeks. It’s generally a long process that entails a lot of waiting. If you don’t have that much time, don’t despair. The SBA loan service has a special program for you. This is called the SBA Express loans! As the name suggests, this service is a super-fast loan alternative that shortens the length of time you have to wait for your SBA loan approval. It usually takes about 36 hours, give-or-take.
While you wait for your SBA approval, we suggest you make yourself available for possibly more follow-up assessments. Keep in touch with your lender if you want the whole application and approval process to be fast.
- Final assistance
Hopefully, if your application meets the requirements of the SBA loan specifications, you will be getting your loan problem solved. As we expect, you will have to invest plenty of time to put together a great application for an SBA loan. After submitting your application, we suggest you relax and hope for the best.