The U.S. Small Business Administration is a government department aimed at helping small business. One of the ways they do this is to offer loan programs to small business owners.
Remember you’re still borrowing from the bank, who, as an SBA-approved provider, will lend you the money (the SBA guarantees the loan to the bank).
To help prepare your application, follow these guidelines.
Check your credit rating
Both your bank and the SBA want to be confident your credit rating is sound so it’s important you’re aware what it is. Identify any blemishes on your personal and business credit report and fix or clear up any inaccuracies.
The SBA and your bank are going to want to know that you’re fully prepared to explain your credit rating.
Documentation
Regardless of which loan you’re applying for, there’s paperwork that applies to all of them. Getting all of the below organized in advance should speed up the process and demonstrate your diligence.
- Outline your personal background, educational and business experience and your previous addresses going back at least two years
- An updated business plan so the SBA understands your business and strategy, reasons for applying for the loan, planned goals and objectives
- A resume that lays out your employment history, both as a business owner and as an employee. Emphasize evidence of management or business experience, especially if you’re starting a new business
- Any debts or liabilities
- Your contribution to the loan and how you intend to make repayments
Once you’ve collected the information around the history and state of your business, it’s time to locate the financial documents. The SBA and your bank will want to see:
- Income tax returns for the past 3 years
- Financial statements
- Any legal documents such as business licenses and registrations, copies of contracts with any third parties and commercial leases, depending on what’s required
- Any loans you’ve applied for in the past, as well as any applications that may have been declined
SBA forms
There are several forms you’ll need to fill out, depending on the loan you’re applying for. In most cases, you’ll have to complete:
Borrower Information Form (1919) You need to complete this form when applying for a 7(a) loan and submit it to the SBA participating lender. The SBA is looking to determine your suitability for a loan and needs to conduct background checks, so the form asks for details about you as the owner/applicant, the loan, existing indebtedness and information about any other government financing you may have used.
Personal financial statement (413) The SBA uses this information to determine if you’ll be able to meet the loan repayments.
It’s always best to check these forms with your bank manager or accountant, or at the very least, get them to review the paperwork before you submit it to the SBA.
Summary
At the end of the day, the better prepared you are, the more streamlined the process will be. Remembering that the funds are coming from your bank, it’s wise to complete your application with their assistance. Not only do they have their own criteria, but as an SBA lender, they’ll be able to guide you through the process.
Disclaimer: The information provided in this content is for general educational purposes only and does not constitute professional advice. Locality Bank makes no warranty, express or implied, nor assumes any legal liability or any responsibility for the accuracy, correctness, completeness, or any actions taken based on the information provided. Always consult a qualified professional for specific guidance related to your situation.
