The Small Business Association (SBA) has some beneficial options for businesses who need to secure financing for their businesses. Applying for a loan through the SBA can bring in the financing needed through a reputable organization, helping your business to achieve its operational and financial goals. This article provides an overview of how SBA loans work.
Select the Right SBA Loan
There are a number of loans available from the Small Business Association. Most businesses choose one of the three primary loans: the 7(a) loan; the 504 loan; or the Microloan program. The 7(a) loan is often used to secure equipment or real estate, acquire other companies, or refinance debts, among other uses. The 504 loan, which allows up to $5.5 million, has a number of uses, but has limitations based on net worth and net income. The Microloan program, which allows up to $50,000 is often used for a small amount of money required for getting started.
Qualifications for an SBA Loan
Though each type of SBA loan has slightly different requirements, there are qualifications that apply across all SBA loans. Borrowers must be running a for-profit business in the United States, have a good credit score, and have invested equity into the business. In addition, borrowers must have exhausted all other options for securing funding.
There is quite a bit of paperwork required for SBA loan applications. Having all the paperwork in order and ready will help the application process go more smoothly. The required paperwork includes:
- A balance sheet and profit-loss statement (existing business) or projected cash flow (new business)
- Business and personal tax returns
- Business documents, including articles of incorporation, commercial leases, and business licenses
- Evidence of skills in the industry
- A detailed explanation of funding needs
- Collateral list
- A personal finance statement
- A business plan
For help getting an SBA loan of your own, contact us today.