Small business loans, more commonly called SBA loans, are loans that many people take out when they want to start a business or if they need to cover business expenses that they do not have profits to cover yet. Like taking out any other type of loan, there are a few things you need to do before a lending institution will give you a loan. Below are some of the most important things to know about taking out an SBA loan.
Can Anyone Take Out an SBA Loan?
The only people who can take out SBA loans are people who are taking out the loan to start a business or people who are taking out a loan because they already have a business (and business expenses). However, owning a business, or trying to buy a business, isn’t guaranteed to get you an SBA loan. Like any other type of loan, your credit score is one of the biggest determining factors on whether or not you qualify for an SBA loan.
How high your credit score needs to be to qualify for an SBA loan will depend on your individual lending institution. Generally speaking, the higher your credit score, the better your chances are for getting approved for a loan. For these loans, you will likely have the option of using either your personal credit score or your business credit score. If you do have this option, use whichever credit score is higher.
What Documents Do You Need to Apply?
You will also need several documents in order to apply for an SBA loan. If you already have a business, it is best to use business paperwork. However, you can use personal documents if you think it would be better; if you are unsure of which would be better, talk to your loan manager. If you do not yet have a business, then you will need to use personal finance documentation.
If you do not yet have a business, you will need to bring your tax returns (possibly tax transcripts), pay stubs, and other income documentation. If you have a business, you will need business tax records, financial statements, and accounts payable and receivable documents. All of these documents will work to prove whether or not you can afford to pay off your loan.
Whether you need money because you are just starting a business or keeping one running, try applying for an SBA. You never know how a little loan can make a big difference.