SBA Loan Approval Tips for Beginners
SBA loans are a bit different from traditional business loans, which is why first-time borrowers sometimes find themselves with questions even if they have experience applying for traditional business loans or assisting an employer with an application. Many steps are similar, and many of the criteria are based on the same information, but SBA loan products are designed to help small companies contribute to local economies, so they also require proof your income and assets meet the program requirements. Many of the longest running programs like the 504 loan program also ask you to demonstrate how you’ll contribute to a stronger local economy. So how do you approach these new requirements?
1. Go To the Source for Research
The SBA website is a valuable tool because the requirements for each program change from year to year. Often, there are also additional loan programs authorized in one form or another on a temporary basis, and less often, even new permanent additions to their offerings. As a result, it’s always a good idea to review the requirements for the loan program you want and the additional options available before you apply. Once you’ve checked out that information, it’s also a good idea to directly research the lender you’re going to apply with. SBA loans are not loans from the SBA, after all, they’re guaranteed by the administration but granted by traditional lenders the administration has partnered with. Check out the lender’s requirements and representation of the product to learn more about what it will take to write a business plan that appeals to both groups.
2. Write A Stellar Business Plan
Using your financial projections and income information from bank statements and your research into the program’s application requirements, prepare a business plan that covers all the information needed in traditional plans as well as any additional insights or information the lender and SBA want to see. Spend a lot of time curating and editing the plan, it’s essentially your argument for the loan. This is where referencing other application requirements like a good credit score or reserve assets is also crucial, because issues like burn time during a business downturn are considered heavily.
3. Consider a Preferred Lender
One of the few downsides to borrowing through an SBA program is the time it can take to get approval. Traditional SBA loan providers approve the application and then send it on to the administration for approval, which can add anywhere from a couple weeks to a couple months to the process when compared to traditional bank loans. Luckily, there are lenders the administration trusts to wholly approve loans without oversight. These preferred lenders have been vetted to screen for all the important criteria SBA loans need to meet, from both the perspective of the administration and that of the lender. Working with one can greatly shorten the process.