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Essentials Of The Small Business Administration Loan Application Requirements : jflawfirm

In my last blog, we identified the three kinds of loans currently offered by the Small Business Administration (SBA). Now that you have decided which loan best suits your company’s financial needs, it is time to start the laborious process of completing the SBA loan application. The SBA application breaks down into numerous sections and each section must be meticulously scrutinized and completed. The various categories, that need to be addressed as part of the loan application process includes:

  1. Personal Background. The Small Business Administration is preoccupied with knowing about you. Personal information including prior residences, other names, criminal record, if applicable, and your educational background.

  2. Resumes. This is part of the personal background information requirements. An applicable resume depicts your business as one that is equipped, organized, and well managed. The resume should be detailed and comprehensive as if you were to apply for an employment position. If you do not have a professional resume and wish to get funding from the SBA, consider having a resume professionally created to make the right impact.

  3. Business Plan. This is essential to receiving funding. Your plan must include financial projections like cash flow, income, and specific goals of your company. Furthermore, what are the specific plans for your company? How long will you need to reach them? And most importantly, how does the money from the SBA fit within your specific plan? Overall, this section is to demonstrate to the SBA that you are worth the investment. For the business plan to be successful, I would recommend providing an executive summary, market analysis, description of your business, information about your company’s management team, marketing, and sales strategy, and financial projections and statements. Remember, the more money you are requesting from the SBA the more the SBA will dive deep into all of the components of your application.

  4. Use of Loan. How does getting this money to suit your overall business plan? In this section, you must establish facts that demonstrate that the incoming funds are to be used for what the SBA refers to as a “sound business purpose”. The SBA decides your eligibility, depending on the specific loan you are seeking and how the money will be utilized. 

  5. Personal credit report. Your credit score or lack of credit score could potentially be the focal point of the entire application process. Even though the loan is for business, the SBA requests personal credit information mainly in circumstances where the credit track record of the business does not exist or is very limited. The personal credit score essentially reveals to the SBA or any lender, how you have handled your own personal finances. And, whether such information will be a good indicator as to how you will handle future SBA money. A stellar report will give the SBA the confidence that can manage money, even if that has been your own money up to that point. If your credit score does not meet SBA requirements, the application process is likely ending there. Moreover, the SBA, is going to take a hard look at your score and will utilize the three major reporting bureaus for credit score information.

  6. Business credit report. If your business has been in business for some time, the SBA will want to review and evaluate this specific credit report. As with the personal credit report, the SBA will use the three major credit reporting agencies to get scores. The SBA also utilizes Dun and Bradstreet as a resource to measure your company’s creditworthiness.

  7. Personal and Business Tax Returns. Comparable with credit scores, this remains an integral part of the credit reviewing process. It is best that you analyze your returns with your accountant, especially if you have any ongoing audits with the IRS. Any such information of this type is required disclosure material to the Small Business Administration.

  8. Financial Statements. Balance sheets, profit, and loss statements, and business debt schedule are all required reading for the SBA. A strong balance sheet, profit, loss, contained, and managed debt schedule will collectively work to inspire confidence in the SBA and ultimately you will manage their loan with the same degree of success. Again, I highly suggest that you and your accountant address these documents preceding the completion and filing of any loan applications with the SBA.

  9. Collateral.The higher the risk on the loan the more collateral is going to be required. Collateral, for example, include house, boats, extra real property, equipment, and/or inventory. And, as part of any loan by the SBA, you will need to put up collateral in the event of loan default.

  10. Legal Documents. You might see a request for a business license, registration, articles of incorporation, contracts with third parties, franchise agreements, or any existing leases for commercial real estate or existing leases or purchases for business equipment.

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The best advice I can give you is that when it comes to fulfilling these various requirements you should always think like a lender. Basically, you should prepare your loan application as if someone were coming to you for money. Your application should be complete, comprehensive, and organized. The better prepared you are in the application can result in a faster determination by the SBA. Additionally, make sure you deal with a banker who specializes in SBA-backed loans.

Given the importance of having your loan approved, we advise you not to risk your application approval by not retaining an accountant and or business planner to assist you. If you have any questions regarding the SBA loan process or need a referral to one of our many outside professional partners, please call Jurado & Farshchian, P.L. at (305) 921-0440 or email me at [email protected].