The U.S. Small Business Association (SBA) provides support to small business owners who are looking for affordable financing for their businesses. While they do not directly lend money to businesses, they do assume a portion of the risk of an SBA loan, which encourages banks and other lending institutions to offer these loans with attractive rates and terms.
Applying for an SBA loan can be a complex process, and each lender may have different qualification requirements. The most important thing to remember before applying for an SBA loan is to be extremely well-prepared ahead of time. Pay attention to the following details in order to increase your chances of obtaining that approval on your application.
Check your credit
As with most loans, higher credit scores lead to greater opportunities for an approval of an SBA loan. Make sure to obtain a copy of your credit report from all three credit bureaus ahead of time and correct any errors on your report in order to maximize your credit score before applying.
Research lending options
There are various lenders you can look to for an SBA loan, such as large national banks, local credit unions or alternative lending institutions with expanded approval criteria. Be sure to investigate the factors that affect approvals at each of these options, such as credit score requirements, business duration, annual revenue and more.
Organize your business records
Regardless of which lender you work with, you will need to provide certain documents with your application. While each lender may vary in terms of what they require, it is a good idea to have the following ready to submit upon request:
- Tax returns
- Bank statements
- Profit and loss statements and projections
- Articles of incorporation
- Business license
Prepare a thorough business plan
Before any lender will approve an SBA loan, they will want specific information about your business, it’s future, and what you need the money for. Therefore, you will need to prepare a solid business plan that includes details about your operations and growth strategy. A typical business plan should include information about:
- Executive summary that describes your business and mission statement
- Description of your product or service along with details about the solutions your business provides
- Market analysis to determine your target market as well as competitor information
- Legal structure of your business, such as sole proprietor, limited liability company, s-corporation, etc.
- Sales and marketing strategies
- Financial projections
- Detailed description of what the requested funds will be used for
Work with a qualified business attorney
An attorney with experience in business law can help you understand the best loan to apply for, as well as help you prepare ahead of time to maximize your chance of getting an approval. Additionally, they can review and explain your loan documents, assist throughout the closing process or represent you in court if any legal issues arise.
When it comes to the security of your business, working with an attorney at Churchill, Quinn, Hamilton & Van Donselaar, Ltd. can give you peace of mind that you will be protected. Legal challenges can arise during any stage of your company’s development, and our team has proven experience helping our corporate clients create sound legal strategies for success. Contact our Grayslake office at 847-223-1500 to learn more.