Do you have a firm business idea and plan to act on it? Are you wondering how to raise funds for your new business venture? Worry no more! You have landed at the right place!! Maybe it is time to consider getting a small business administration loan to fund your small business. This is because of the flexible terms and low-interest rates of small business loans, making them an appropriate funding option. Before discussing your business finances further, let us have an in-depth understanding of SBA or small business loans.
Table of contents:
- What is an SBA loan?
- What are the considerations to apply for an SBA loan?
- Eligibility Criteria
- Gather Document Proofs
- Connect With A Lender
- Sit Back And Wait
What is an SBA loan?
SBA loan is a government-backed small business loan usually granted to small businesses to fund the cost associated with expansions or real estate purchases. Although the loans are government-backed, they are issued by a private lender. The borrowers must connect with lending institutes like banks or credit unions to apply for the SBA loan. The essential requirement of a small business loan is a 20% ownership of the company. This hooks the personal assets of the borrowers in case the business fails to perform as expected.
What are the considerations to apply for an SBA loan?
To qualify for an SBA small business loans, lenders demand proof indicating that the business has been operational for at least 2 years. Furthermore, along with being operational, it should be generating decent annual revenues and meeting its financial goals. Credit score also plays a major role in qualifying for a small business loan. A decent credit score of 690 and above is essentially required to qualify; otherwise, the loan application rejection is certain.
Gather Document Proofs
After analyzing your credit score and successfully passing other eligibility criteria, the next step is to gather the required documents. Here is the list of crucial documents that a small business owner needs to submit getting the SBA loan:
- Business records
- Personal income tax returns
- Statement of personal financial history
- SBA’s borrower information form
- Business license
- Cash flow projections of at least the past two years
- Lease agreement(only if applicable)
Connect With A Lender
Now that you are eligible for an SBA loan and have the required document proofs, the next step is to choose a suitable lender. Do some market research and closely analyze which lender will be suitable for your small business funding requirements. It is always advisable to connect with lenders with multiple years of SBA experience. They can guide you better and give you a brief idea of the chances of loan approval. In addition, you as a small business owner must be in good financial standing and have a strong credit history of the past 2 years for a seamless small business loan process.
Sit Back And Wait
Considering the lender or bank you have chosen for getting the SBA loan, approval time will vary accordingly. It can take approximately 30 days to a couple of months for SBA loan approval. Once your loan application is approved, the rest is your lender’s job to close the loan and disburse the amount. The repayment of the loan amount with the fixed interest rate is usually on a monthly basis.
Now that you have understood the considerations and how to apply for a small business loan, connect with a suitable lender to get going with the process!