Learn about SBA loans, the application process and requirements.

Are you an entrepreneur looking to launch your business? What about a small business owner who is looking to expand? Does your business need new equipment or technology? All of these are reasons you might need a Small Business Administration (SBA) loan. If you’re considering applying for a SBA loan, read this post first to fully understand and prepare for the process.  

What to Know When Applying for a Small Business Administration (SBA) Loan

May 2, 2017

Learn about SBA loans and the application process.

Are you an entrepreneur looking to launch your business? What about a small business owner who is looking to expand? Does your business need new equipment or technology? All of these are reasons you might need a Small Business Administration (SBA) loan. If you’re considering applying for a SBA loan, read this post first to fully understand and prepare for the process.

What is the Small Business Administration (SBA)?


The Small Business Administration (SBA) is a government agency that helps small businesses and entrepreneurs by providing a government-backed guarantee on business loans. When financial institutions may not be able to provide financing due to factors such as the age of the business, loan terms the business requires, or lack of sufficient collateral, the SBA is able to provide a guarantee. This provides broader financing options for business owners, start-ups and entrepreneurs.

What is a SBA Loan?


As described on the SBA Website:

SBA sets the guidelines for loans, which are then made by lenders. The SBA guarantees that a percentage of the loans will be repaid, thus mitigating some of the risks to the lender. So when a business applies for a SBA loan, it is actually applying for a commercial loan, structured according to SBA requirements with a SBA guarantee. SBA-guaranteed loans may not be made to a small business if the borrower has access to other financing on reasonable terms.

Since the SBA does not provide direct loans, you will need to apply for a business loan with a lender. This lender will then process your loan application and submit to the SBA on your behalf. Our Business Solutions Department can assist you from start to finish when applying for a SBA loan.

How do you apply for an SBA loan?


To begin, you’ll need to put in a business loan application with your preferred lender. Along with this application, you will need to submit:

            A business plan
            Projected income and expenses
            Balance sheets
            Income statements
            Resumes
            Up to three years’ worth of tax returns 
            Certifications and/or licensing
            Business overview and history

From there, the loan underwriter must document the reasons why the loan could not be approved without a SBA guarantee. If it is determined that the SBA guarantee is not required, then the loan can be approved without going through the additional SBA steps. Once a decision is made on the application, your lender will notify you and explain the next steps. 

If the lender confirms the application needs a SBA guarantee, the SBA will need additional documents before the loan can be submitted for consideration. The lender will provide these documents to you and assist you in fulfilling any other SBA requirements.

Approval from the SBA can take up to ten business days or longer. Once the SBA approves the guarantee on the loan, the business lender will continue processing the application.

What happens once you’re approved?


Depending on the collateral, there may be other processes involved. An appraisal, title search, flood search, environmental checks, etc. may be necessary. Due to these different factors, the length of time it takes to get from application to closing can vary.

After all the additional paperwork and steps are complete, the lender will prepare for closing. Closing documentation will include general lender required documents, as well as SBA required documents. Due to the uniqueness of each loan, the duration of closing varies from loan to loan.

Once closing is finished, pat yourself on the back! You’ll have a new business loan guaranteed by the SBA and ready to tackle your next business initiative. With a trusted lender at your side guiding you through the SBA application, you’ll be able to take your application in stride and be on your way to reaching your next business goal.

 

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