Tips on Making an SBA Loan Application

An SBA loan can often be a great alternative for small businesses that have difficulties trying to get a conventional bank loan. Here are some quick tips for making an application for this type of loan.

Start by Understanding the Types of SBA Loans

The 504 and 7(a) loans are the two types of loans. A 7(a) loan is the same type of loan you would get from a traditional bank, but in this scenario, the SBA guarantees the loan. The guarantee generally ranges from roughly 75% to 85%.

One of the advantages of this type of loan is that it affords the borrower a vast pool of potential financial institutions. Borrowers will often find that practically every bank they speak with is a preferred lending partner of the SBA, so it is easy to get loans such as these approved.

In contrast, a 504 loan is much more like a dual loan. Generally, half the loan value will come from a traditional bank, whereas the other half will come from a certified development company. In this scenario, it is common for the conventional loan to get paid back first, and then the rest gets paid back afterward.

Steps To Take To Apply for a Loan

The process’s first step is gathering all the relevant documentation. This documentation can include items such as personal and business tax returns.

Businesses must also fill out a loan application allowing lenders to obtain a personal credit report for every company owner. Businesses should expect to submit a vast array of financial statements of the business, and owners may need to submit personal financial statements.

Once a business has put this documentation package together, meeting with various business bankers is always a good idea. In the best-case scenario, companies should seek out a banker with experience with these types of loans. Traditionally larger financial institutions have employees that specialize in this type of loan.

Underwriting is the final step of the loan process. During this step, the financial institution you plan to work with will review your documentation and application to decide whether they can approve your loan. Businesses should expect that this process will take roughly two weeks.

Obtaining an SBA loan can often be more of a challenge than a conventional loan, but it is often the case that those applying for this loan have limited options. When a business takes the time to ensure they prepare thoroughly for the process, they have the best chance of obtaining a loan.