SBA Loans for Small Business

Empowerment Group Blog: January 2011

by ngoriel, Community Moderator

  • Created: September 4, 2013, 5:53 pm
  • Updated: September 4, 2013, 5:57 pm

Money is the lifeline of any business, so whether you’re starting a business or running an existing one, securing financing is a major factor, especially for small businesses. Many budding entrepreneurs find the task daunting and don’t even know where to begin.

Here’s a simple yet practical guide on how to go about preparing to apply for a small business loan.

1. What criteria do banks look for in making small business loans?

Different banks or lending institutions may have different standards, but in general, in order to consider your application for a small business loan, banks will require:

  • The loan must be for a sound business purpose. For SBA-guaranteed loans, the business must be eligible based on size, use of loan proceeds and the nature of the business (no lending, speculating, passive investment, pyramid sales, gambling, etc.)
  • You and your partner(s) are of good character, have experience and good personal and/or business credit history
  • Ability to pay back the loan- reasonable to strong collateral (personal and business assets) is very important. SBA expects the loan to be fully secured, but we will not decline a request to guaranty a loan if the only unfavorable factor is insufficient collateral. And of course, owners must have personal equity investment in the business/skin in the game.

2. What information will you need?

Different lenders may require more or fewer documents, but in general, you will need:

  • Personal and business credit history
  • Personal and business financial statements for existing and startup businesses and as well as a projected financial statements
  • Strong, detailed business plan (including personal information such as bios, education, etc.)
  • Cash flow projections for at least a year, and
  • Personal guaranties from all principal owners of the business

3. How can you set yourself up from the beginning to make the process easier? (i.e. accounting systems, etc.)

Be prepared; be thorough; be truthful.

  • Choose your lending institution carefully. Larger banks tend to shy away from small loans as they are less profitable and take the same amount of underwriting and servicing. That doesn’t mean large banks do not make small loans; it is just more difficult.
  • Approach banks or lending institutions you have worked with or are a customer of
  • Explore community banks and Credit Unions
  • Talk to a lending officer and find out exactly what documentation they require
  • Be thorough, bring everything they ask. Many loan applications are denied or face unnecessary hurdles because of incomplete applications.

credit cards
2006-06-26 10:12:27 by ArtChain

More likely to get small business LOANS

The US Small Business Administration (SBA) helps businesses get started by underwriting / insuring bank loans. That makes it easier for you to get a business loan, and you will usually pay lower interest.
You need to develop a business plan an submit ti to the SBA; if approved, they'll provide the paperwork you can take to your bank.
If you're interested in this, check score.org (an organization of retired executives who advise small businesses) and see if there is a SCORE office in your community. SCORE has lots of info on SBA programs.
Also, check your local community colleges to see in they offer courses in writing business plans and starting small businesses.


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