Thanks to the U.S. Small Business Administration, many entrepreneurs can qualify for a commercial loan that is backed by the federal government. However, getting an SBA loan is not exactly easy and it can be difficult to decide if it is the right choice for your business. If you are unfamiliar with the process, here are a few tips to help you prepare for the application.
Are There Different Types of SBA Loans?
Depending on your needs, there are a variety of reputable loan programs provided by the SBA. For example, a 7(a) program is generally the most flexible, while a 504 loan offers fixed-rate financing for updates and expansion. A microloan, on the other hand, is a short-term agreement for working capital, inventory or equipment. Microloans are usually handled by nonprofit organizations who can guide you through the technical aspects of interest rates and terms.
Although there are several types of loans to explore, the SBA is committed to helping small business owners visualize their dreams. The main goal is to resolve issues with cash flow by supplying entrepreneurs with critical startup funds and low monthly payments. For those who are new to operations and management, there is no need for collateral or an extended history of transactions.
What Will I Need to Submit an Application?
In most cases, you will be required to meet with a loan officer to discuss your finances and determine your eligibility for funding. If the lender is not familiar with your concept, share relevant information about your products and explain your basis for determining demand. Present your ideas with confidence to gain support before delving into paperwork and accounts.
A positive attitude can work wonders, but you can’t replace the facts when you are talking to a lender. Be ready to supply copies of your invoices, tax returns and personal statements to verify your income and expenses. It is better to have too much information than to show up unprepared.
Choosing Your Bank Carefully
Above all else, lender standards tend to fluctuate and rejection does not constitute the final word on funding. To maximize your potential for success, review local lenders who have a reputation for financing small businesses. If can find a bank that will underwrite your loan, you can skip unnecessary meetings with hesitant loan officers.
If you want to get an SBA loan, use these tips to guide you in your search for an open-minded lender. In terms of business ventures, there is no better way to start a new journey with adequate funding.