How to Prepare Your SBA Loan Package
As a small business, SBA loans are by far the best options you’ve got. Offered by U.S. Small Business Administration, these loans are long-term, have low interest rate, and are backed by the federal government. This means, as a borrower, not only you get more time and pay less in interest; but in case you fail to repay the loan, the government steps in and pays off your debts. Of course, it is the dream loan for any small business!
But, understandably, getting a SBA loan is not easy! The SBA works with a number of trusted lenders to offer these loans. And, your loan application must be approved by the intermediary lender you are applying with as well as the SBA. No matter which lender you are applying with, both the institutions will evaluate your application by considering your credit score, financial statement of you as an individual as well as your business, any collateral that you can offer etc.
There are a number of SBA loan types available to businesses today:
- SBA 7 (a) Loans
- CDC/SBA 504 loans
- SBA CAPLines
- SBA Export Loans
- SBA Disaster Loans
Among all these, SBA 7 (a) is the most popular one today. So, if you are planning to apply for SBA 7 (a) or any other type of SBA loan, it is essential that you prepare well. Knowing the crucial components of the loan package and preparing them meticulously is the key here.
Elements of SBA loan package
The SBA loan package is nothing but the application you submit to the lender to receive a loan backed by U.S. Small Business Administration.
The SBA loan package should include three main element:
- Statement of purpose
- Business plan
- Financial statement
So, let’s take a look at how important each of these three components are and how you should prepare them.
Statement of Purpose
More often than not, businesses end up writing a lengthy piece of article with no clarity of thoughts for this one. Well, your confusion about what to include and what not is understandable. And this is why, the SBA has clearly specified the crucial information they want to receive from your ‘Statement of Purpose’.
Let’s take a look
- Information about the loan you are requesting
- Clearly defined business plan
- Some details about how the loan will positively impact your business
- Some details about how much time and money you’ve invested in the business as an owner so far.
Remember, 100% financing is not an option with SBA. Why? The answer to this is simple. While the U.S. Small Business Administration is ready to back you up in case of things going south, they also need to know that you have invested enough of your time and money to put up a good fight.
Skipping any information about the loan request is risky here. And this is true for any loan you are applying for, not just SBA loan. A lender is most interested to know how you would use the money and more importantly, how do you plan to give it back. Answering these questions sincerely gives your application a lot better chance of getting approved.
Last but not the least, include vital information such as the loan amount you are applying for, loan duration, proof of ownership, the reason you are looking for financial assistance, any collateral that you can offer etc.
A lender will always want to know the details of your business to check your repayment capabilities. Therefore, make sure to include your business plan in the SBA loan package.
The business plan should include the following:
- A detailed description of the business
- A well-calculated prediction for future
- Information about the products or services you offer
- A clear idea about how the business and management works
Business plan is an essential aspect of your loan application. Both the lender and SBA consider these details of utmost importance. So, if you are thinking about skipping on any details, think again!
At the cost of sounding repetitive, a lender is most interested to know how you would repay the loan. Therefore, offering a clear picture of what you are financially capable of and how you plan to repay the loan works as a huge confidence booster.
Keeping this in mind, you should include the following:
- Cash flow report- income vs expenses
- Income statement – profit and loss
- Balance sheet- net worth of the business
- Personal finance statement- personal net worth, debts if any
These information is required by lenders, so that they can evaluate your application on basis of:
Now that you know the crucial components of your SBA loan application, it is time to do some research and find out the best lender that you can apply with. Gather all necessary documents, prepare the loan package sincerely and rely on a lender with great track record to amplify your chances of SBA loan approval.
We have been offering SBA loans to business like you for years. Please get in touch with us at 1-888-897-9414 to grow your business today!