SBA loans are definitely the most popular small business financing option available today. However, small business owners have a love-hate relationship with it. While an SBA loan does offer low-interest rates and long repayment terms for those who qualify, the application process can be grueling, stressful, as well as lengthy.
Generally, an SBA loan requires a great deal of paperwork and the process can take up to 60 to 90 days. SBA-associated loans are highly competitive and you’d need to get all things ready to qualify. The necessary documents vary depending on the type of SBA loan, along with the lenders you’ll be working with. It’s important to give the lenders the information they want. If you miss even one document, your loan will be rejected, and your credit rating will suffer.
But before you apply for SBA loans of any type, it’s always a wise choice to learn more about it and what it has to offer. With that, here are the documents you need to submit regardless of the type of SBA loan you choose:
1. Business Information
You’ll need to provide basic information about your business, such as your company name, address, age, number of employees, date, and other necessary business information. This helps potential lenders evaluate if your business can satisfy their criteria.
2. SBA Loan Request
It’s imperative you indicate the amount of money you wish to borrow and specify the use of those funds. Also, be sure that your intention of use is permissible under the type of SBA loan program you’re applying for.
3. Personal Background Information
You will be required to submit personal background documents, such as your previous names and addresses. If you have a criminal record, you will have to specify the type of offense, the jurisdiction, the final verdict, and more regarding it. A criminal record does not prohibit you from qualifying, as long as you provide all the details surrounding the criminal record.
4. Business Plan
Submitting your business plan along with your SBA loan application shows lenders you’re serious about your business. You need to include how an SBA loan can help your business’ growth strategy. Other than that, here’s what you should include in your business plan:
- Executive Summary
- Company Description
- Products and Services
- Market Analysis
- Strategy and Implementation
- Organization and Management Team
- Financial Plan Projections
- Potential lenders may want to see prior industry experience before approving your SBA loan. They often ask you to submit a personal resume, as well as the resumes of other management-level employees in your business.
6. Financial Statements
When applying for an SBA loan, you’ll definitely need to show financial statements because lenders need to assess your business’ current financial situation. They often require at least five financial documents, such as:
- Bank Statements
- Statement of Cash Flow
- Business Debt Schedule
- Balance Sheets (list of financial assets and liabilities)
7. Personal and Business Credit Reports
Your personal credit report demonstrates how well you manage personal finances. Lenders generally tend to consider small businesses as risky prospects, so your personal credit score is an important factor. The higher your personal credit score, the better your chances to be approved become. On the other hand, your business credit report is necessary for lenders in evaluating your business’ financial history. So, before you apply for an SBA loan, be sure to check your personal and business credit prior to submitting your application. Doing so will give you time to make any necessary changes.
Related: How to Review Your Credit Report
8. Tax Returns
Lastly, you may need to provide both personal and business tax returns so that lenders can verify your personal and business income. If you have an existing business, you may need to present tax returns for the past three years.
How to Apply for an SBA Loan
A lot of lenders offer different types of SBA loans. When applying for one, do remember that the SBA isn’t the one offering the loans, rather, they just act as the guarantor for it. If you’re looking for lenders that do offer SBA loans, you can ask the SBA directly for their accredited lending companies. You can also ask loan brokers near you for advice.
Here’s the breakdown of the steps you have to take in applying for an SBA loan:
Step 1. Make sure your business is eligible.
This means you must be running your business for quite some time now (at least 2 years). Other than that, you should have an excellent credit background, no criminal history, never defaulted on government loans, and must have invested enough equity in the business.
Step 2. Prepare Necessary Documents.
This includes the documents stated above. Depending on the type of SBA loan you apply for, the lenders may ask you to submit more, or only some of the paperwork mentioned above.
Step 3. Complete the application form.
Although most information needed in the application form will already be in your business plan, you will still be required to fill out the necessary information in the application form. This includes, but not limited, to the following:
- Details about your business
- Loan amount
- Financing plans
- Reason for the loan
- Personal information
Step 4. Prepare and submit the forms.
This includes SBA forms 1919, 413, 159, and 912. Ask the SBA or the lender if they require other forms, as well.
Step 5. Wait for Your SBA loan approval.
Given that you have provided all the things mentioned, it won’t be long until the lenders call you back for your SBA loan approval. A lot of the applications can be approved within 36 hours, while others may take a few weeks.