Loans facilitated by the Small Business Administration (SBA) are highly desirable for businesses. However, some businesses are much more likely to qualify for these loans than others. This article goes over the traits that make qualification easier.
Basic Eligibility Requirements
There are basic eligibility standards a business must meet to acquire an SBA loan. First, the business must be a small business. You can find out if yours is one by using the SBA’s table of small business size standards.
Additionally, a company must be based in the United States or its territories and operate there, and it must be a for-profit venture. An investment of the business owner’s “time or money into the business” is also required, per the SBA. Finally, the owner must have tried to access other financing options without being able to “get funds from any other financial lender.”
Communication with a Lender
The SBA itself does not hand out SBA loans. Instead, it works with lenders by guaranteeing part of each loan to reduce the lenders’ risk. The upshot is that you will need to be prepared to communicate with a lender—not just the SBA.
Different lenders may have slightly different paperwork requirements, but no matter who you work with, you should expect to need to gather many different documents. For instance, you’ll almost certainly need a profit and loss statement, financial statements, and personal and business tax returns. You can see an official sample checklist for one type of SBA loan here.
Revenue, Credit, and Collateral
Lenders will also want to see proof that your application is strong in these areas: revenue, credit history, and collateral. Proving that your business has enough revenue to meet its monthly payment obligations is important for obvious reasons. Lenders will mine your personal and business credit scores to see if you’re a trustworthy borrower. Finally, collateral is often needed to reassure the lender of the borrower’s commitment.
Topfund Capital would love to hear from you if you’re curious about your business’s financing options, so get in touch today.