One of the most popular types of loans for businesses is one made by the Small Business Administration. With its wide array of financing options for small and medium-sized business owners, it’s no wonder that SBA loans area growing in popularity among the small business community. If you’ve ever thought about getting an SBA loan, we’ll tell you everything that you need to know.
Do Your Research
To apply for an SBA loan and get approved, it’s important to know what kind of business you’re in, the financial situation of your competition, and how your industry performs. You should also learn about how SBA loans work and familiarize yourself with their basic requirements. Keep in mind that not every lender is an SBA-approved lender. However, the Small Business Administration will guarantee loans from approved lenders as long as they don’t discriminate in their lending practices.
Know Your Loan Amount
The SBA has a wide variety of loan programs to fit your needs. These include the 504 loan, which provides financing for land, buildings, and renovations, and the Export Express loan, which lets small businesses tap into streamlined financing to help them develop or expand their export markets.
Maintain a Good Credit Score
To get an SBA loan, applicants should have a good credit score. Also, individual lenders can have their own minimum personal credit score requirements. Additionally, for certain loans—7(a) loans up to $350,000 and Community Advantage loans—applicants must be prescreened by the lender using their FICO SBSS score.
Seek Expert Help
Although it’s possible to “DIY” your SBA loan application, you might want to consider hiring a professional to prepare the documents and financial projections required by the Small Business Administration. Find a SCORE mentor or an SBDC advisor. These professionals will provide free consulting to help you succeed. A CPA enrolled agent (EA) or accounting professional can help you find financing, develop financial projections, and provide valuable insights into your cash flow.
Consider Key Person Insurance
As an SBA loan applicant, be sure to research insurance options. It could ensure your company has what it needs no matter what challenges it might face. To meet the federal requirements for an SBA loan, you need to have a life insurance policy with a face value greater than or equal to the amount of your loan, and you need to have a term that is greater than or equal to the duration of your loan.
