The Small Business Administration (SBA) provides loans and other financial assistance to help small businesses grow and create jobs.
They can be used for a variety of purposes, such as purchasing equipment, expanding your business, or hiring new employees.
In this article, you will learn precisely where to get an SBA loan for your business and what type of information the lenders are looking for before proceeding with the loan.
Where can I get an SBA Loan?
Small businesses are the backbone of the American economy.
According to the SBA, small businesses account for 99.7% of all U.S. employer firms, and they create 61% of all new jobs in the country.
To start or grow a small business, many entrepreneurs rely on Small Business Administration (SBA) loans which are obtained in several ways, including:
1. Local Community Banks
Small businesses usually go to the big banks when they want to get an SBA loan. But, did you know that local community banks offer SBA loans?
Community banks are smaller, local banks that focus on giving back to the community.
They offer personal service and are more likely to work with you to get the loan you need.
An SBA loan from a community bank can be a great option for small businesses. Community banks typically have lower interest rates and fees than big banks.
They also have shorter waiting periods for approval and can offer more flexible repayment terms.
If you’re looking for an SBA loan, be sure to check out your local community bank.
You may be surprised at how easy it is to get the financing you need from a bank that’s committed to helping your business grow.
2. Large Commercial Banks
The Small Business Administration (SBA) is a United States government agency that provides support to entrepreneurs and small businesses.
One of the ways the SBA helps small businesses is by providing loans through commercial banks.
Getting an SBA loan from a large commercial bank can be difficult, but it’s not impossible.
The most important thing to do is to make sure you are prepared and have all of your documentation in order.
If you can provide all of this information and show that your business is viable and has growth potential, you can get approved for an SBA loan.
Be sure to shop around for the best interest rates and terms, as they can vary from bank to bank.
3. Lending websites
- Funding Circle
Small businesses seeking an SBA loan can apply through Funding Circle, a peer-to-peer lending platform.
The company has partnered with the Small Business Administration (SBA) to offer to finance to small businesses that might not otherwise have access to capital.
Funding Circle’s unsecured loans range in size from $25,000 to $500,000.
Small businesses can apply for a loan on the company’s website.
Prosper is a great option if you’re in the market for an SBA loan.
They offer loans that range from $2,000 to $40,000 and have a simple application process.
You can get pre-approved in minutes and receive your funds within a few days.
4. Direct Online Lenders
An SBA loan from a direct online lender can be a great way to get the money you need to start or grow your business.
With an SBA loan, you can borrow up to $350,000 for working capital, equipment, inventory, or real estate. And since the SBA guarantees a portion of each loan, you’ll likely get a lower interest rate than you would from a traditional bank.
When looking for a direct online lender for an SBA loan, it’s important to compare rates and terms among different lenders.
Be sure to ask about origination fees, closing costs, and interest rates.
You should also check to see if the lender offers extended repayment terms – this can help you manage your cash flow and keep your monthly payments affordable.
What Information Are The Lenders Looking For? How Will They Judge Me?
When you are looking for an SBA loan, the lender is going to be looking for specific information:
Obtaining an SBA loan can be a great way to finance your small business, but it’s important to know that lenders check your credit profile before approving you for an SBA loan.
1. Credit Profile
This is because the SBA guarantees a certain percentage of the loan, so the lender wants to make sure that you have a good credit profile.
2. Cashflow and loans
Lenders will also look at your cash flow and loans, so make sure you’re up-to-date on your finances and have a good credit history.
If you can show that your business is doing well and that you’re a responsible borrower, you’ll have a better chance of being approved for an SBA loan.
3. Business Assets
When you’re looking for an SBA loan, the lender will want to make sure you have some business assets. The SBA guarantees a portion of the loan, so the lender is protected in case of default.
One way to prove you have assets is to provide documentation from your accountant or tax preparer. This might include a balance sheet or a profit and loss statement.
If you’re self-employed, you can also provide a copy of your business license or proof of incorporation. And if you own property used for business purposes, you can provide a copy of the deed or lease agreement.
4. Investors in the business
Many lenders require a business to have some investors to be approved for an SBA loan. This is because the SBA wants to ensure that the business has some skin in the game.
If the business fails, the investors will be on the hook for the money they put into the company, not the taxpayers.
This can be a difficult hurdle to overcome if you don’t have any wealthy friends or family members willing to invest in your company.
However, some lenders will approve a loan without an investor, but you may need to have a stronger credit score or provide more collateral.
5. Length of time in the business
Lenders will check your business’s longevity before approving you for an SBA loan, as the government-backed program is meant to help established businesses with a proven track record.
In conclusion, it is important to note that the SBA offers a variety of loan products that can help business owners get the funding they need to start or grow their businesses.
And yes, obtaining an SBA loan can be lengthy, but it is worth the wait for small business owners looking to grow their companies.
However, there are some things you can do to make the process go more smoothly, such as preparing a comprehensive business plan and having a good credit history.
By being prepared and following the lender’s guidelines, you can increase your chances of securing the financing you need to take your business to the next level.