SBA Loan

5 Tips to Successfully Obtain an SBA Loan

posted in: Blog

As you build and create your new business, financial capital is key to obtaining whatever is necessary for your business to function and grow. There are the initial outlays of capital to get a business started, but expansion and growth also require financing. Many businesses use various capital financing options that are geared specifically toward businesses, such as Small Business Administration (SBA) loans. These financing options provide the means to have capital to address the needs of a new business and one at the point of expansion. Plus, these loans are guaranteed, thus reducing the risk for lenders.

However, working through the application process can be intimidating, especially if you are a new business owner. Here are 5 tips to successfully obtaining an SBA loan and making the process as smooth as possible.

Keep Your Documents in Order

No matter what type of lender you go to for capital financing, documentation and organization is key to making it through the application process successfully.

The first thing that any lender will want to know is how financially stable your business is right now. For new business owners, that means you may have to demonstrate how financially sound you are personally, since you will likely be the guarantor of any business financing for your company.

The application process is less complicated if your regular company’s processes mean routinely updating your financial, accounting, and tax records. As you set up your business, put systems in place to keep your records organized and well-maintained. Do not ignore your books, just because your business has picked up. It could make your application process more complicated because you will now have to take the time to update everything and get it current. When you do it as part of your regular business administration routine, then you will just have to hit print and be ready to submit your information for the application process.

The Credit of Your Business

When you think of credit score, you often think of your FICO score. However, businesses also have a credit score. By paying your business’ bills and accounts on time, you build credit criteria for your company. Avoid bankruptcies, foreclosures, and late payments. Like your personal credit, make sure to regularly check your business credit report for any errors and dispute them when necessary.

Work with a lender and find a loan that you have a high likelihood of being approved for before they do the hard pull of your credit. Applying for multiple loans in a short period can result in several hard pulls that can negatively impact your credit score, so if you can avoid the impact of multiple pulls.

Understand What Type of Financing You Need

Perhaps you have tried for an SBA loan in the past, and you were rejected, or the process took a long time, thus putting your business at financial risk. The reality is that SBA loans typically take 90 days to complete and the SBA sets high standards that the lenders must follow in order to participate in the program. If you need financing for your business sooner, then you might want to consider some alternatives, such as a line of credit through your bank or a merchant cash advance against your business credit cards, because these requirements are typically less strict.

Therefore, it is important to determine what you need for your business. Mortgage and financial experts can help you to understand the financial needs of your business and help you to determine if a working capital loan is necessary or if a line of credit would be a better fit.

Plus, they can also work with you to understand how the application process can end up impacting your timetable regarding fulfilling the needs of your business.

How is Your Cash Flow?

By keeping your financials up to date, you will have a clear idea of what your cash flow situation is for your business. For instance, you have found a property that will be the perfect fit for the next stage of your business. If you plan on purchasing that commercial property through an SBA loan, then you need to be prepared to demonstrate that your business can handle the additional payment.

On the other hand, if you are just barely covering expenses from month to month, then your business might not be in a position to access this additional financing until you improve the cash flow and can demonstrate that your cash flow is consistently positive from month to month.

The Impact of Your Business Size

The size of your business is also going to impact whether you can access SBA financing. The SBA has specific regulations to determine what qualifies as a small business. The reason you need to know if your business meets that criteria is that you could be spending a lot of time getting ready for an application process that you no longer qualify for because of the growth of your business.

Working with your lender, you can determine what loans your business is eligible for and if those financing options can meet the needs of your business right now.

For businesses in New Jersey, Pennsylvania, New York, Maryland, and Florida, our knowledgeable and experienced team can help you find the right financing to fit your needs. Contact us today!