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How To Get An SBA Loan for Your Company

It’s been a challenging year for small businesses. The need for extra cash may be more pressing than before as many businesses dig their way out of the COVID-19 economic crisis. Many companies, regardless of size, use borrowed capital to fuel growth and fund other initiatives. Long-term, low-interest financing makes SBA loans some of the most affordable business loans on the market, and the process of getting an SBA loan can be lengthy and involved (but worth it). Follow these steps to make the process more manageable:

1. Determine your eligibility for an SBA loan.

First and foremost, make sure you’re eligible for an SBA loan. Depending on the program you choose, there are specific guidelines, and some are more flexible than others; however, the general requirements include that your business:

  • Be a registered for-profit business

  • Be located and operating in the U.S.

  • Meet the SBA definition of a small business

  • Has an owner that has invested time and money into the business

  • Has no past delinquencies or defaults on government debts

2. Choose your SBA loan program.

The next step in getting an SBA loan is choosing your specific loan program. The SBA offers various loan programs, and each program has unique requirements, terms, loan amounts, typical interest rates, purposes, etc. It’s important to consider all of the options and determine which SBA loan program is best for your business. A few of the most popular options include:

SBA 7 (a) Loans

A few different SBA 7 (a) loans offered by SBA lending partners (typically banks) are available, with loan amounts up to five million dollars. The terms can be as long as 25 years, with interest rates ranging from eight to thirteen percent, and can be used for any business purpose.

SBA 504/CDC Loans

Sometimes referred to as SBA real estate loans, SBA 504/CDC loans are used exclusively for major fixed asset purchases, such as large equipment or real estate purchases. The distinctive structure—a participating Certified Development Company (CDC) in your area provides 40 percent of the loan amount, an SBA lender provides 50 percent, and you offer the remaining 10 percent. The loans can extend up to five and a half million, with interest rates falling between five to six percent and terms up to 25 years.

SBA Microloans

The SBA Microloan program is designed to offer small businesses affordable capital in smaller amounts—with a maximum loan amount of $50,000. The maximum term available is six years, with interest rates falling between eight and thirteen percent. Because the eligibility criteria for this program is more flexible, it can be an excellent option for start-up businesses.

3. Find the right SBA lender.

The right SBA lender for you will largely depend on the loan program you’ve chosen. Check with your local bank or the bank you use for your business and ask them what kind of SBA loans they offer. You can also connect to an SBA lender using the SBA’s website.

4. Gather the information and documentation needed to apply.

The SBA loan application requires significant information and documentation—some of which will depend on your lender and loan program. Overall, make sure that you gather the following information and documents for your SBA loan application:

  • Basic business information

  • Basic personal and background information for you, as well as any other business owners

  • Loan request letter detailing the amount you’re asking for and how you plan to use the funds

  • Business plan

  • Personal and business tax returns

  • Personal and business financial statements—including a balance sheet, profit and loss statement, bank statements, and cash flow statement for the business

  • Existing business debt schedule, if applicable

  • Legal documents like business licenses, leases, and contracts

  • Any SBA loan requirements that are unique to your program

5. Complete your application.

Once you’ve gathered all of the information and documentation you need, the next step to getting an SBA loan is completing the application. The specific document will depend on the lender. Some lenders may offer online-based applications, whereas others will require that you complete a paper form.

6. Close your loan and receive funds.

Congratulations! The final step is working with your SBA lender to close the loan.

These are the basic steps to getting an SBA loan. Although the process may not be particularly fast or simple, the time and effort necessary to get an SBA loan are well worth it.

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