SBA Loans for Your Small Business

A small business loan may be just what you need to finance that next entrepreneurial venture, and there are many different options available that will be most suitable for your needs. Financing a small business strictly from a personal savings account may not be a strategic move; you'll find that you do run out of cash fast, and watching that bank account slowly disappear can create unnecessary anxiety. Many banks and lending institutions can extend a small business loan with competitive rates for your startup. The key items to provide at this stage will include:

• Your business plan
• References
• Your personal credit history
• Educational background summary
• A cohesive mission statement with your goals and vision included

The most important part of getting your small business loan approved is providing that critical presentation. This is where professional materials and information are necessary. You may want to work with an accountant and editor to pull together financial statements, letters, reference materials, and other items into an attractive presentation.

The key questions asked during the small business loan application process include:

• How much money are you looking to finance?
• What, specifically, will you be using the money for?
• When and how do you plan to repay the loan?
• What do you plan to do if the loan is not extended?
• What other sources of income are you counting on?
• What are the short and long-term revenue projections for the business?

Most of these questions can be answered with the business plan in hand, but specific loan repayment strategies and other financing may take some more time to think through and plan.

Your personal credit report plays a significant role in the loan process. If your credit report shows many recent negative marks or poor credit history overall, this will impact your application. Small business loans are designed to hold you, the owner, responsible for repayment. A personal credit report will highlight how consistently you have been in making other loan repayments. It's always important to check your credit report on your own individually; you want to avoid any unknown obstacles well before the lender reviews it!

The Small Business Administration (SBA) offers a variety of programs for different types of businesses. These are available through your bank or financial institution, and may take up to 3-4 weeks during the review process; sometimes more. Each state also offers a number of small business grants. The best way to find these types of small business loans is by checking with the local department or revenue, getting a referral from a local banker, or doing some research at the community center and library.

The three key loan programs provided by the U.S. Small Business Association include:

1. 7(a) Loan Guaranty Program: offering up to $2,000,000 and the most common loan extended

2. Microloan Program: offering up to $35,000 for qualified start-up businesses

3. 504 Loan Program as a Certified Development Company: offering fixed-rate financing for capital equipment and machinery

The SBA also offers specialized loan programs, including the Gulf Opportunity Pilot Loan program and other disaster recovery programs. To qualify for the small business loan, the business must be owned and operated within the United Sates, and meet certain space and size requirements in order to be deemed a small business.

7(a) loans are the most common type of small business loan, and these will need to meet a specific set of criteria. Eligible businesses for this loan include franchises, recreational clubs, farms and agricultural businesses, medical facilities, and fishing vessels. Ineligible businesses include real estate investment firms, lenders of banks and financial institutions, pyramid sales plans, many gambling activities, and religious and non-profit organizations. The Small Business Administration is very specific about what types of businesses are eligible for this loan, as funds are restricted to some specific fields.

Obtaining the right loan that is suitable for your business is the first step in developing a steady foundation for your future success. Getting the loan approved may be challenging, but providing as much detail and noteworthy information as possible during the application process will help speed things along. Most startup companies can take advantage of the benefits of a business loan, and all it requires is a little strategy and planning!