Here’s your checklist for an SBA 504 Loan

(Credit: HomeCare) — Many businesses wait until they need financing before checking to see if they’re qualified to receive a business loan. If you are a small business owner planning on expanding anytime soon, it is wise to take time to prepare your requirements now.

It’s essential to have your loan application documents on hand to be prepared. The list below will guide you through the requirements needed for securing a Small Business Administration (SBA) 504 Loan.

Why an SBA Loan?

The SBA aims to help you have access to funds for various reasons, such as purchasing equipment or relocating to a new office space. SBA loans are the perfect financing solution if you want backing from the government. The SBA assumes much of your risk as a small business owner.

SBA 504 Loan: What It Is and the Requirements You Will Need to Meet

It’s important to remember, the SBA doesn’t necessarily release these loans; you apply for the financing from SBA-accredited lenders, such as Lewis & Clark Certified Development Company (CDC), which is part of Lewis & Clark Development Group.

The SBA 504 Loan – also known as the CDC/504 loan – is ideal for companies that need long-term, fixed-rate financing. 

The SBA 504 Loan can be used for land acquisitions, equipment, new construction, renovation projects, leasehold improvements, and to cover professional feels such as engineering or architectural services.

The following provides a quick checklist of all the standard documents you will need to have on hand.

Credit History & Score

Your business credit score is a number that represents your creditworthiness. Lenders use it to decide whether to give you a loan. The higher your score, the more likely you will get approved for a loan.

The minimum credit scores you need to have to qualify for a SBA 504 Loan is 680 and up, with a 10% down payment to purchase the asset.

This credit score may vary depending on the lender you’re working with. Lewis & Clark Development Group will provide you with further information.

Other credentials that will be reviewed are your creditworthiness to the length of time your business has been operating.

Comprehensive Business Plan

Your business plan is your road map for the future. It shows the lender how you plan to use the loan and how you will grow your business to pay it back. If you can’t show a solid business plan, the lender may be hesitant to give you a loan, even if it will be backed by the SBA.

Desired Loan Amount

Don’t guess the maximum amount of money you can get from your lender. Know exactly where you’re going to use the money and how much you require to fund those needs. Remember that SBA loans are like any debt out there, so don’t seek out a considerable amount of money if you have no use for it.

Purpose for Getting an SBA Loan

Similar to a business plan, your lenders will want to know why you need the capital in the first place. Explain the purposes for getting a loan, whether it will be used for hiring new employees or getting bulk orders from suppliers.

Knowing the purpose of your loan will ensure you’re getting the right type of financing and that you’re filling out all the necessary paperwork correctly. It can also help you understand your monthly payments and how long it will take you to pay off your debt.

Detailed Cash Flow, Including Financial Projections

Lenders need to see how much money is coming in and out of your business to make informed decisions. Your cash flow will make it clear whether you’re paying your suppliers on time and maximizing your income. This will determine whether you are a good candidate for an SBA loan.

Collateral

While lenders consider every borrower’s unique situation, most of them will ask for collateral. Collateral gives lenders some added security to ensure that you will repay your loan accordingly. It reduces the risk for lenders when loaning you money. Collateral may be in the form of real estate assets, invoices, cash reserves, inventory or equipment.

Businesses need to have all the support they can get to pursue long-term growth— including financing. Even though you might not need capital right now, make sure you have all these requirements ready for faster application in the future.

Click here for more information about the SBA 504 Loan. Contact our SBA 504 Loan Team of Ashley Hruby and Derrick Becker today.