SBA Loan Application Process Explained In 7 Easy Steps

You may consider taking a loan if you are starting your own business or have been working for years. One option of getting a loan is through an SBA loan application. Small Business Administration (SBA) has been assisting small businesses in getting reasonably-priced loans when the traditional financing option is no longer beneficial to the company. If you are struggling to collect the money or don’t have enough funds to start your own company, then an SBA loan application is the solution. It is essential to understand that SBA has loan money available, but they do not issue funds directly to the businesses. Instead, the SBA works with its preferred lenders, an essential distinction from regular government loans.

But if you don’t know what an SBA loan application is, we are here to give you a detailed guide about what it is and how to apply for it.

What Is An SBA Loan?

If you decide to get the SBA loan, then the SBA loan application procedure has various elements to it. But before diving into that, you must understand what an SBA Loan Apply is. An SBA loan is a kind of loan that small businesses can receive that is partly guaranteed and backed by the Small Business Administration.

That SBA does not give loans to small businesses. Rather, the SBA partners with some lenders to give the loans and put in place some strict guidelines for the loans through the partners. People who are lending partners of SBA include micro-lending institutions, traditional lenders, and community lenders.

You can get SBA loans for almost every business use and can put an SBA loan application for up to $5 million. Some loan lenders also put a limit on the amount you can use. So, before taking a loan, check the conditions of your specific lender (if any).

The SBA Loan Application Process

To begin your SBA loan application process, you should strengthen your odds of getting a loan by learning all about the process. And showing the lenders that you are serious about your work.

To begin with, you should gather information about all the loan programs available and which one is perfect for your business. Then you need to search for an SBA-qualified lender to get your loan approved for your business.

Step 1: Determine If You Are Eligible 

Before you put your SBA loan application in, ensure you are eligible for the loan. However, you may still get an SBA loan even if you do not qualify for a loan through a lender. The base requirement for an SBA loan eligibility involves:

  • Being a small business as per SBA standards
  • Belonging to a qualified industry
  • Being in the business for a minimum of two years
  • Being a for-profit company that is based in the USA
  • Not having any misconducts or defaults on government loans 
  • Having a good personal credit (almost all owners) 

The business owners should have put in an acceptable amount of valuation. They must also prove to the lender that they attempted to get a loan from others. How to figure out if your business is small or not?

  • Their yearly receipts are between or under $1 million and $41.5 million.
  • The capacity of the employees is between or under 50 to 1500.

To be contemplated as a small business by the SBA, your company should also:

  • Have independent operations and ownership.
  • Not be nationally commanding in the sector (i.e., possessing a majority of the market share)
  • It should be a for-profit for any business (e.g., LLC or Corp)
  • Be physically operated and located in America or its territories.

Note: Some SBA loan application programs have additional eligibility requirements, while others may waive some requirements. For instance, an SBA Startup loan for a small business does not have a credit score or two-year rule.

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Step 2: Find The Perfect SBA Loan Application Program

Once you figure out if you are eligible for an SBA loan application program, consider why you require the loan. There are different loans for different requirements. Some of the most general SBA loans comprise:

SBA 7(a) 

SBA 7(a) covers many different loans. Generally, these loans have a specific period. You can take an SBA 7 of up to $5 million that you can use for any legal work.

Export Loans 

SBA loan application is for small export companies that face problems obtaining business loans. There are three loan programs- International Trade, SBA Export Express, and Export Working Capital.

SBA 504

Can assist a company in buying fixed assets like properties, equipment, or expansion. The SBA takes a down payment of nearly 10 to 20%. The borrower applies through a Certified Development Company (CDC) rather than a moneylender.

Economic Injury Disaster Loans (EIDL) 

The EIDL loan is specific to some disasters such as coronavirus, hurricanes, etc. This loan assists businesses that have faced financial problems due to a disaster or were damaged for some reason. The loan is available at a low-interest rate and is accessible for a maximum of $2 million.

Paycheck Protection Program (PPP) 

The PPP loan assists sole proprietors, small business owners, independent contractors, and non-profit organizations affected by coronavirus by giving forgivable loans for salary and non-payroll costs.

Veterans Advantage Guaranteed Loans

This loan assists veterans get the financing they require to begin, succeed or grow their business. The veteran can appeal for a maximum of $5 million in funds assistance.

Carefully think about why you require the small business loan when selecting the one for you.

Step 3: Pick a lender

Since the SBA does not give loans directly, you need to search for a lender. The purpose of the SBA is to issue guidelines, but the lenders can decide the eligibility of the loan and credit score requirements.

When searching for where you can put your SBA loan application, you can get in touch with Alnicor Consulting. When selecting the right lender, evaluate the following:

  • How much money do you need to take
  • How long does the SBA loan application process take
  • If you have to pay any down payment for the loan 
  • Qualifications for the program
  • If you require any collateral and what type, if necessary
  • Interest rates for the SBA loan you’re putting in the SBA loan application for
  • The SBA programs the lender provides.

Ensure that lender is an SBA-selected lender. Why? SBA-selected lenders have a record of offering loans to small businesses and know the SBA loan application process.

Step 4: Collect Information

Before putting in your SBA loan application, you should collect important information for your lender. The things you will need are:

  • Affiliate and ownership documents 
  • Business history and overview
  • Lease information about your business. For instance, your current lease agreement’s copy.
  • Business permits and licenses
  • Business and personal federal income tax returns
  • Business and personal financial statements
  • Loan application history.

Lenders may need extra information based on the SBA loan application you submit. If you are buying an established business, you normally need to give your additional documentation for the loan.

Step 5: Fill Out The SBA Loan Application

SBA loan applications may be different based on the lender and the program. Nevertheless, the SBA loan application has basic information requirements that need to be filled out. The majority of the details may already be available in your business plan, such as:

  • Financial information 
  • Ownership breakdown
  • Contact information
  • Any other debt that is given by the government, counting other SBA loans
  • Basic business details
  • Executive summary
  • The number of employees.

You further have to give:

  • How are you planning to repay the full amount of the SBA loan?
  • Information on how you are going to use the loan money.

Different SBA loan applications may need extra information. Talk to your loan officer about the required information before you submit your SBA loan application.

Step 6: Complete The Forms 

Did you collect all your papers and fill out your SBA loan application? Good! The one last step before you are finished and ready to give everything to your lender. In several instances, the SBA may require a few additional forms from you, such as:

  • Borrower information form (SBA Form 1919)
  • FEE disclosure form  (SBA Form 159)
  • Personal financial statement (SBA Form 413)

Step 7: Submit your SBA loan application to the lender

After filling out all your required forms and SBA loan application, submit all the papers to the lender. To approve a loan for your business, your lender may take weeks or even months to review the paperwork.

To be aware of any changes throughout the process, stay in contact with your lender and check in regularly. And send any extra information required instantly to keep the process going.

Conclusion

If you fear finding a lender or getting an SBA loan application is too difficult, you can get help from the experts at Alnicor Consulting. Alnicor Consulting assists small businesses in getting an SBA loan at flexible interest rates and better terms. The dedicated financing personnel will provide step-by-step guidance to get a loan.

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