Curious about a SBA Loan? Here is what you need to know.
The U.S. Small Business Administration (SBA) loan program is an excellent resource that you can use to achieve your business goals. An SBA loan is not actually a loan, it’s a guarantee made by the SBA to banks and lenders to pay back a portion of a loan if it defaults. This guarantee alleviates risk to lenders and can result in better loan terms for you.
With an SBA loan you can amortize over a longer term, giving your monthly cash flow a little boost. You will also enjoy less stringent reporting requirements in the long run.
As with many government or special programs, SBA loans come with very specific guidelines and requirements that must be followed to enjoy the benefits of the program. But rest assured, with preparation you can navigate this process successfully.
The primary hurdle to overcome with an SBA loan is the hefty documentation initially required. This documentation includes background checks, resumes, business plans, personal and business credit reports, income tax returns, bank and financial statements, collateral and your legal documents. The SBA also requires a personal guarantee on all loans. If you want the bank to back your loan, you need to show that you have the confidence to back up the loan as well.
Before seeking out a loan officer, it’s important to make sure you have all this documentation in good order. You should have explanations for anything out of the ordinary in your financials. Why is there a dip or dramatic uptick in your profits?
With all your paperwork in order, you can now work with your lender to apply for your loan. To make this process as smooth as possible, you’ll want to work with an SBA preferred lender. These lenders have an established relationship with the SBA and will be able to make credit decisions independently. This will speed the process up and make things more straight forward for you. Your business broker can assist you with recommendations for SBA preferred lenders. In addition to business brokerage, I can help you with your financials. Clean books will ultimately make for a smooth business transaction.
With clear expectations, preparation and a little bit of help, you can enjoy the benefits of an SBA loan.