Many businesses that are first starting out don’t have the capital they need to operate as efficiently as they could. As a result, they often look to organizations like the Small Business Administration (SBA) to give them the help they need. SBA small business loans are appealing because of their lower interest rates and longer payment terms. The average amount was $107,000 in 2018 for an SBA-backed small business loan. Here are five business lending tips to help you get approved for an SBA loan.
Do Your Research
If you’re looking for business lending from the SBA, you’ll need to know your complete financial situation in order to get approved. This includes things like your risk factors and credit history. You’ll also want to do research on how SBA loans work and what their requirements are. The SBA offers programs that guarantee loans from various lenders but doesn’t approve loans. You’ll have to meet the requirements of the lender in order to qualify for an SBA loan.
Figure Out The Amount You Need
There are several SBA business lending programs to choose from. Each one has a different focus. For example, an SBA 504 loan is used for building and land renovations while an Export Express loan helps small businesses expand their export markets. The most popular SBA program is the 7(a) program that allows business owners to borrow up to $5 million with a ten year repayment period. It’s a good idea to know how much you need by writing out a budget for how the money will be spent. You can use this information when speaking with the lender to help you get approved.
Know Your Numbers
If you want to qualify for an SBA loan, you’re going to want to have solid financials and good credit. Some loans require you to submit at least three years of financial information such as bank records and tax returns. You’ll need to prove that you have the ability to repay the loans before you can get approved.
Ask For Professional Help
There are plenty of reports you’ll need to fill out and documents you’ll need to provide to qualify for an SBA loan. Asking for help from a financial expert to navigate you through the process can help make it less stressful and overwhelming. You can seek a SCORE mentor to give you free assistance in creating financial projections and preparing a business plan. Hiring an accounting professional can help you keep your financial information more organized and lender-ready.
Invest In Life Insurance
Having a life insurance policy that’s equal to or greater than your loan amount is one of the requirements for getting an SBA loan. The term of your policy should also be longer than your loan term as well. This policy should be for the key person that the business can’t survive without.
By following these business lending tips, you’ll increase your chances of qualifying for an SBA loan. By staying organized and doing careful research, you can speed up the process and get the funding you need to help your business grow.
If you’d like to find out more about small business loans, reach out to Lewis and Clark Development Group’s Small Business Assistance Team today. Contact Tracy Whitney, SBA 504 Loan Program Officer, at (701) 667-7602 or at tracy@lcdgroup.org