A Complete Guide to SBA Loans

What Is an SBA Loan?

The Small Business Administration (SBA) partners with various financial institutions and lenders to offer long-term, low-cost loans ranging from $500 to $5.5 million. Whether you want to expand your operations, purchase new equipment, or hire more employees, SBA loans can be a game-changer for business owners.

How to Qualify for an SBA Loan

SBA loan requirements vary depending on the type of loan, but here are some basic qualifications:

You must be a US citizen who’s at least 21 years old.
You can’t have bankruptcies or foreclosures within the last three years of applying.
You can’t have outstanding tax liens.
You must have reasonable owner equity to invest in either time, money, or both.
You’re required to prove you’ve sought alternative financial resources but couldn’t secure them.

In addition, the following finances are examined to determine eligibility:

Cash flow
Assets
Number of workers
Years in operation
External and internal risks
Bankruptcy filings
Liens and judgments

For SBA loan approval, you also need a good credit score. Find out how to raise yours and how long it takes.

Learn More

How to Apply for an SBA Loan

Below is a step-by-step guide on how to apply for an SBA loan:

Gather Documents and Business Information

Before you apply, make sure you have all the necessary paperwork ready, including:

Your business plan
Tax returns
Resume
Bank statements
Driver’s license
Proof of business ownership
Industry experience

You’ll also need to provide your insurance information, desired loan amount, and plans for loan proceeds.

Organize Your Finances

When applying for an SBA loan, the ultimate goal is to prove your responsibility as a borrower. By gathering and organizing your business finances, you can demonstrate your commitment to responsible borrowing. Start by organizing your financial statements, including your current income, balance sheet, and income statement for the past two to three years. Additionally, include your cash flow statement and federal income tax returns for the same period (depending on the loan program). You’ll also need to create detailed cash flow projections on a monthly basis for the next year to help lenders assess your ability to manage funds effectively and repay the loan.

For certain loan programs like the 504 loan, you may need to complete additional forms and provide specific information, including SBA Form 2450, an environmental impact statement, and evidence of meeting economic development goals. The more organized and thorough you are with your application, the better your chances of success.

Come Up With Collateral

SBA loan applicants are also required to present collateral as an extra layer of security. Collateral can come in various forms, including equipment, buildings, accounts receivable, and even inventory in certain cases. Make sure to assess the assets you have that could qualify as collateral and include them in your loan application.

Research and Choose a Lender

Before you apply for an SBA loan, it’s important to understand the different types of loan providers. Here are the four main ones you need to know:

Referral agents connect applicants with lenders and earn a 2% to 4% referral fee.
Referral and packaging agents refer you to lenders and help prepare your loan application, earning a 4% referral fee plus packaging fees.
Lending service provider (LSP) agents are hired by lenders to handle all aspects of SBA loan functions, from origination to liquidation.
Small business lending companies (SBLC) are authorized by the SBA to make 7(a) loans.

Remember, rate and loan amounts vary by lender, so it’s important to do your research before making any decisions.

Fill Out Forms and Apply

Finally, it’s time to apply for your SBA loan. You can streamline the application process using lending platforms. These allow you to submit a single application to multiple SBA-designated “Preferred Lenders,” saving you time and increasing your chances of securing your loan faster. By utilizing a lending platform, you avoid the hassle of going through each lender’s lengthy requirements.

Key Takeaways

SBA loans typically take six to 12 months to secure, but at QualiFi, we have small business loan programs available with an approval time of just one week.

With loan amounts ranging from $50,000 to $5 million and interest rates as low as 3%, we have the best SBA loan options for your small business financing needs. Contact us today to learn more about how we help you cut out banker bureaucracy and receive the direct, responsive assistance you deserve.