Business owners and individuals affected by a declared natural disaster can reimburse their losses with SBA disaster loans. Like any other loans, SBA disaster loans have certain qualifications you have to meet before you can qualify for their assistance.
Here are five reasons that could disqualify you to avail the SBA loans and here’s what you can do about it:
1. You have a low credit score.
What can you do? Choose a lender that isn’t too strict on credit scores.
The SBA requires you to have a strong credit score – at least 600 in order to qualify. There’s a high risk of being denied of an SBA loan if your credit score is low. However, there are other lenders that don’t mind a low score and your business will still be able to have a more holistic evaluation process.
2. You just started your business
What can you do? You can find lenders that allow startups to borrow.
Most businesses know that it’s hard to qualify for an SBA loan if you’re a startup company. Lenders typically require the business to have establishment. If they do lend money to startups, lenders expect the business owners to have years of experience in their industry.
3. You do not have enough to collateral
What can you do? Find a lender that does not require or requires little collateral.
Naturally, banks want to protect themselves incase businesses are not able to pay the loan back. Even though SBA guarantees to pay up to 75% of the loan when the business backs out, banks still want a collateral. By providing enough collateral, there’s a big chance that your application will get approved.
4. You don’t want to guarantee the loan
What can you do? Pick a lender that does not require you to personally guarantee a loan.
By guaranteeing a loan personally, you become responsible for paying the loan back even if your business closes down. A personal guarantee enables lenders to sell your assets to pay for the loan. If you refuse to guarantee the loan, lenders would most likely disqualify you for an SBA loan.
5. Your business belongs in an ineligible industry
What can you do? Find a lender that is not particular about which industry you belong to.
Let’s say you have what it takes to qualify for a loan – enough collateral, high credit score, and several years in the industry. You can still get rejected if your industry is ineligible for an SBA loan. Industries such as life insurance companies, lobbying organizations, certain franchises, and certain types of health businesses, among others.
If you feel like you don’t qualify for an SBA disaster loan, SMB Compass is here to help. We’ve helped hundreds of small business in the country and we can certainly help yours too! Feel free to contact us through email at email@example.com or via phone at (646) 569-9496.