The Beginner’s Guide to Getting SBA Loans

The Small Business Administration offers many resources to business owners. Small businesses are the backbone of many communities, which means its to the government’s advantage to encourage banks to loan money to small businesses. The SBA isn’t actually in the lending business. It backs loans, reducing the risk to lenders which in turn incentivizes banks to partner with small businesses.

Qualifications for an SBA Loan

SBA loans are known for being paperwork-heavy. There are reporting requirements that come with an SBA loan that you won’t have with a traditional loan. However, the favorable rates and terms generally offset these issues. Saving thousands of dollars in interest money over the term of loan makes it worth the effort.

To qualify for an SBA loan, you must own a for-profit business in the United States. Most industries qualify, but there are a few that won’t, such as banks, pawn shops or life insurance companies. You must have invested equity in the business and have exhausted other types of financing options. You should also have excellent credit and be in business for a minimum of two years.

How to Apply for an SBA Loan

Visit the Small Business Development Center in your town to take advantage of some of the services offered to small businesses. You can get your paperwork in order by developing your business plan and learning more about SBA loans and their requirements. If you need help getting your tax documents and financials in order, you’ll find help with all types of business issues to get your house in order, so to speak.

There are two basic types of SBA loans. The 7(a) loan is for business financing. The 504 loan program is geared toward long-term real estate financing. When applying for your SBA loan, you’ll need to know what the money will be used for to determine the type of loan you want.

Next, you’ll need to find a lender that is SBA-approved. The process to apply is similar to getting a conventional loan, but it will probably take more time. As noted, you will need a lot of documentation about your business and finances. The SBA may want to see your industry experience. You may have to provide collateral. You should be prepared with financial projections.

Lenders and the SBA Development Centers will be able to work with you through the process. You’re not alone when you are trying to get an SBA loan. Use the resources that are available to you to get the financing you need to grow your business.

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