5 Tips for Obtaining an SBA Loan
Getting small business loans, also known as SBA loans, can sometimes be more difficult than going to a traditional bank. Some business owners feel this is next to impossible, feeling it’s only for companies that have a strong cash flow. While cash flow is important, there are ways to encourage a decision in the company’s favor. When seeking an SBA loan, here are five important guidelines to follow.
1. Ensure Good Credit Before Requesting a Loan
Good credit is necessary for these types of loans. Know that problems related to bankruptcy, foreclosure, and charge-offs can make it impossible to get these loans. Do a credit check on yourself by requesting a credit report. If you notice problems or discrepancies, now is the time to handle them.
2. Have All Documentation in Order
Documentation is a necessity when applying for a loan, particularly one with the small business administration. In this case, it’s helpful to have a professional manage the accounting and tax records. This ensures everything is up-to-date and organized, providing a clean and accurate portfolio to show when asked for company records.
3. Understand Cash Flow is Crucial for Small Business Loans
Besides showing documentation, it’s important to prove cash flow that is currently coming into the business. This allows the lender to get a better idea of how much the company makes and feel confident that it can get paid off. A financial plan that demonstrates how monthly payments will be made, in addition to other expenses, is a must.
4. Know Which Bank to Approach
Before going to the first bank that offers an SBA loan, it’s smarter to shop around. That’s because large banks tend to prefer big clients. If the business is small or medium sized, they are better off at a smaller bank. Building relationships with bankers in the area and getting to know these businesses can solidify in making this decision.
5. Have an Idea of What Loan to Apply For
There’s more than one type of small business loan. Learn about the different options offered. Some loans are used for commercial real estate, while others can be used for anything the business needs. These can make a difference in how the bank responds to the request.
When applying for SBA loans, it’s important to know what type of loan to ask for. Shop around at different banks to learn about the various rates. Coming prepared with documents and a plan showing how the loan will get paid off can help a lender decide in the company’s favor, as can fixing a problematic credit score. These little differences can make it possible to get the lending needed.
