SBA Loan: Qualifying and Applying
In this first segment of this two-part article
we will discuss some of the general requirements and application procedures
involved in acquiring an SBA loan.
According to federal government research,
small businesses provide about 75% of the net new jobs added to Americas
economy. They also employ fully one-half of Americas private sector workforce.
99.7% of all employers in the U.S. are small business owners. These statistics
make a strong case for the existence of a federal organization dedicated
to the promotion and proliferation of small businesses in this country.
In 1953 the United States government
established the Small Business Administration (SBA) as a way of
assisting entrepreneurs in forming successful small businesses through
government guaranteed loans. While the SBA does make many small-business
loans itself, its primary function is to guarantee the small-business loans
made by private lenders.
Most SBA loans are secured through
any one of the SBAs many licensed partners nationwide. Besides
establishing lending guidelines for their partners, the SBA also ensures
reasonable loan terms by guaranteeing major portions of the loan in the
event of a borrower default. Because of the decreased liability provided
by the SBA, the lender is able to offer better interest rates and options
to businesses in the early stages of development.
Before we get too excited about the potential
benefits of SBA loans, it may be a good idea to first talk about who can
potentially qualify. The size of your company obviously plays a large role
in securing an SBA loan; after all, this is about small business.
If you run a manufacturing company, its
possible to have up to 1,500 employees working for you and still qualify
for an SBA loan. On the other hand, depending on the type of manufacturing
you do, it may be more likely that youll be limited to 500 employees in
order to qualify for loan consideration.
For some industries, the SBA lender
may look at your companys average revenue.
For example, if you run a wholesale or retail business, your average annual
sales for the past three years cannot exceed $6 million to $29 million,
depending on the type of business you own. Construction companies need
to fall into the $12 million to $28.5 million range. Basically, if you
make too much, youre considered too big to need an SBA loan. Its also very
important that youre running an independently owned for-profit organization
if you are considering SBA loans.
If you still qualify keep reading.
When beginning the SBA loan application
process, your lender will require you to have some specific information
ready. The first document youll need is your business profile; this simply
describes the type of business you run, your annual sales revenue, the
number of people you currently employ, and how long youve been in business.
You will also need to provide a loan request. This is a description of
how money you need and how you plan to spend it. As with any loan, you
will need to provide collateral. Be prepared to explain how you plan to
secure the loan.
The most important information you will
need to provide is the businesss financial statements for the past three
years. These include: balance statement, income statement, and the statement
of cash flows. As the owner of the business, you will need to provide not
only your personal financial statements, but also the financial statements
of any other individuals that hold 20% or more equity in the company. Most
lenders will also ask for personal tax returns for the last three years.
In the next portion of this article, SBA
Loans: Options, Benefits, and Lenders, we will further examine what
kinds of loan options are available, and for what kinds of businesses they
are most advantageous. Lastly, we will discuss different types of SBA lenders.
Cameron Brown is an internet marketer specializing
in ranking
automation. For information on how an SBA Loan can benefit your small
business, visit Security National Capital
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