5 Steps to Improve Your SBA Loan Application Approval

Starting or running a business is never easy. You have to get new products, buy equipment, and hire staff members. On top of that, you have to promote your business to entice more people to visit your store. You can do all these things if you have a budget.

Cash plays a critical role in the productivity of any business. Without it, you wouldn’t know the number of sales you make each day. Moreover, you wouldn’t be able to sustain the needs of your firm. However, there are moments when the business purchase goes sour. In times like this, you need to visit an SBA loan company.

Many people thought that this firm is another lending service, but the truth is that it doesn’t provide loans. The Small Business Administration (SBA) is an agency governed by the Federal Government. Their purpose is to provide guidelines to all financial institutions associated with them. In that way, borrowers can still repay the borrowed funds, and the bank will not go bankrupt.

However, you can’t just get the loan because you need it. You need to apply if you want to avail this loan. Nevertheless, asking for this financial support is not enough. You need to qualify to make your loan application a success.

There are certain requirements that you must have if you want to get this credit. In this post, you will learn the things you must prepare to get small business loans. Furthermore, we will discuss the best time to avail this credit.

Things to Prepare to Qualify for a Small Business Loan

Surely, you want to know how to get a small business loan for a startup company. There are a few things you need to prepare when applying for this credit. Whether you want to get it personally or through an online lending, you should know the requirements of each provider. You may read reviews of SBA loan companies to know their qualifications. But for the sake of this article, we will discuss the things you need to provide when getting this loan.

Here are the things you must prepare to qualify for this financial support:

1. Improve Your Business and Personal Credit Scores.

Credit scores are one of the things they consider on whether or not they should approve the request. Hence, you need to provide your credit records to your chosen lending company. Unfortunately, not all borrowers have a business credit history. Luckily, you can still qualify for this loan despite the absence of credit record. You only need to provide the lender your personal credit score.

The purpose of this document is to know if the applicant can pay his debt on time. The SBA financing company checks the credit rating of the applicant. If the score is less than 300, then your chance of getting this loan is low.

Fortunately, you can still improve your credit history. You only need to pay your credit on or before the deadline. According to a study conducted by the Federal Trade Commission, 1 in 4 consumers have destructive credit report errors. Nonetheless, 4 out of 5 borrowers who had bad credit managed to modify their reputation.

What they did was they got a copy of their annual credit reports. They checked the information to ensure that the data is correct. You can also do the same thing. You just need to visit AnnualCreditReport.com to get your records for free.

However, if you own an established business, you can provide your business credit score to the small business financing firm. To qualify for this loan; your credit rating must be at least 100. If your rating is less than 100, you can do the tips mentioned above. If you saw any error, you may contact the business credit bureau. This institution will correct all the mistakes in the record.

Generally speaking, you need to have good business and personal credit scores to qualify for this loan. However, it depends on the SBA loan requirements of the lender. For this reason, you need to know the things that the provider wants. Otherwise, you only have a small chance of getting the loan.

2. Know the Provider’s Requirements and Qualifications.

This tip relates to the first advice. As mentioned earlier, you need to know the requirements of your chosen lender. Otherwise, you may not get their approval.
When preparing for your SBA loan application, you need to get your credit records, years in business, and annual revenues. These documents will help the provider decide on whether or not he should grant your request.

Apart from that, you also need to update your government loans. If you have pre-existing debts, you must pay them before you submit your application. Furthermore, you can’t be on the list of ineligible businesses. Otherwise, you won’t get other benefits provided by the SBA agency.
Nevertheless, if applying for this loan is too tedious, you can submit your application via online. Although it needs your credit score, annual revenues and years in business, the process is less stringent than banks.

3. Gather Your Legal Documents and Financial Statements.

Aside from credit history, lenders also ask for legal documents and financial statements. These files ensure the provider that you have no disputes with other loan providers, and you own a legal firm. To prove the legality of your business and your capability to repay the funds, you must submit the following documents:

1. Commercial leases
2. Driver’s license
3. Business license
4. Business and personal bank statements
5. Incorporation articles
6. Income statement and balance sheet
7. Resume
8. Income tax returns (both business and personal)
9. Financial projections

The last requirement is conditional. It only applies when your business has a limited operating history. Otherwise, you don’t need to submit it if your business is a bit old.

Because of these requirements, you should expect that preparing these documents is time-consuming. Nevertheless, it will benefit your company, especially when you get the lender’s approval.

However, if you’re in a rush, you can opt for alternative business loans. These solutions don’t ask for numerous requirements, making it less stressful to receive the loan.

4. Try to Create a Powerful and Presentable Business Concept.

The best SBA loan companies don’t give cash because they want to. They want to know how their borrowers will use the funds and repay them. For this reason, you need to have a good business plan.

However, creating an ideal business concept is not easy. You need to make it believable and enticing at the same time. Don’t fret! There are a few things you need to mention when creating a good business plan, and these are:

1. Industry analysis
2. Management team
3. Operations and facilities plan
4. Description of your product and/or service
5. Sales, promotions, and marketing strategies
6. Description of the company
7. SWOT analysis
8. Provide Collateral to Your Chosen Loan Provider.

The last thing you need to prepare is collateral. Collateral is any asset that can be seized by the lender. It serves as a guaranty if the borrower fails to pay his debts. The SBA provider takes away your entity and sells it to buyers to cover up your unpaid fees.

However, there are times when SBA funds are not enough. Thus, to make it adequate, you need to offer a personal guaranty. It refers to getting 20% or more of the business entity from the owner. Hence, it puts your assets and credit score on the hook.

Nevertheless, there are lending services that don’t ask for collateral, but need a personal guaranty. Others want a blanket lien on your asset, allowing the lender to get the business entities to recoup your balance. Thus, when getting a small enterprise loan, don’t be afraid to ask the lender. In that way, you will know the things to prepare to qualify for the credit application.

However, if you don’t have a personal guaranty or collateral to offer, you can go for unsecured loans. These providers don’t ask for entities. However, you need to keep in mind that their interest rates are higher than traditional funding. Hence, you need to save a lot of cash to pay your debt.

When Should You Acquire a Small Business Loan?

You already knew how and why small business loan company asks for requirements. This time, we will focus on the best time to get their help.

One of the misconceptions about SBA funds is that it’s only for start-up businesses. Though it’s intended for small enterprises, it doesn’t mean you can only use it if your business is new. In fact, well-established companies can also take advantage of this loan. So the question is – when is the right time to get the loan?

There’s no perfect time to acquire these funds. You can get it anytime you need additional funding. For instance, if you want to buy a piece of land for your business expansion, then you can get this loan. Another situation is when you need to buy new equipment for your store.

When you have decided to get this loan, you need to do the tips mentioned above. In that way, you have more chances to get their approval.

Learn more things about small enterprise financing. Go to our website, CrowdReviews.com, and read our reviews on small business loans.