Demystifying the SBA Loan Application Process

Securing small business financing in the current credit market can be an imposing challenge. Getting a traditional loan for your small business can seem like a daunting, if not impossible, task. Recognizing this, the Small Business Administration (SBA) has created several initiatives designed to make getting a bank loan possible for businesses who might fall just short of a bank’s requirements for an unsecured loan.

Before applying for an SBA-guaranteed loan, first look at the different SBA loan options available to see which is right for your business.

For a larger loan that can be used for real estate, as well as for large, expensive equipment purchases, the SBA offers 504 loans. These loans can be used for land or building purchases and major improvements such as landscaping or building a parking lot, as well as building facilities or purchasing long-term machinery and equipment. However, these loans are not intended for real estate speculation, nor can they be used as working capital. Like the SBA Microloan program, these funds also cannot be used to pay down existing debt.

The SBA offers different programs to assist small businesses in getting funding, but for all of them, some basic information will need to be in order before you can apply. Your resume, information on your personal background (such as past names or addresses), income tax returns, bank and financial statements, a personal and business credit report, any legal documents your particular business may require (such as business licenses or franchise agreements), a detailed business plan, and a collateral document should all be in order before you begin the process of applying for any SBA loan program.

Once you have all this information, be prepared to answer questions about your business and the funds you are applying for. Any loan officer looking at your application will quiz you about your available collateral, figures such as your working capital and earnings requirements, your own personal investment in the business, your management of day-to-day business operations (such as how you receive inventory or distribute goods and services and how you pay your debts), as well as the details of the financing you are seeking, such as why you need the funds and how, when, and where exactly they will be spent. You should have all your answers ready for these questions and know your business plan well so you can back up your answers by pointing to the relevant information there.

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