Finance: Seven Tips for Landing an SBA Loan

1.  Provide details on exactly how much financing you need and how you will use it. Be prepared to provide a precise dollar amount and details of how you will use the funds. For example, if you’re seeking $250,000 to expand your business, explain how you will use the funds (i.e. you need $200,000 to purchase equipment and $50,000 for working capital and 3 months of employee salaries while you ramp up production. Provide a written quote for the equipment). If you’re planning to consolidate debts and refinance for a longer term, provide copies of your promissory notes and state how much you think you can save with the refinance.

2.  Provide information about company management. Banks like to understand who runs the company, so provide a resume for each owner or key employee and describe their functions and responsibilities. If certain key positions have not yet been filled, include a thorough job description of the type of person you are seeking.

3.  Be prepared to offer collateral. The SBA requires collateral to fully secure your loan, to the extent that it is available. If you own a home, you will likely be asked to pledge it. The SBA may also request a lien on your business assets and may require life insurance on sole owners of a business. Most loans made by banks are secured loans, and therefore approval may be contingent on a guarantor who is willing to offer collateral.  

4.  Detail your credit history and credit score. Your credit score is an integral part of the loan process. Your bank will eventually run its own credit report, but providing information prior to them doing so may allow you to discuss any issues ahead of time. If you don't know your credit score, take the time to research it on the Internet.

5.  Provide complete copies of tax returns, financial statements and bank statements. One way to streamline this process is to scan your financial documents and provide them to your lender in the form of a disk or flash drive, or via email.

6.  Explain how you’ll achieve your projections. Now is the time to sell your lender on your vision and forecasted success. If customers have expressed a desire to do business with you, give your lender a copy of their correspondence. Prove to the lender that a market for your product /service exists and demonstrate the validity of your sales and expense figures. If your Cost of Goods Sold (COGS) has historically been 65% and you can lower them to 55%, provide details of your calculations. If the loan for which you are applying is intended for a new piece of equipment that will allow you to reduce your staff needs, describe how this will occur and show the math.

7.  Expect questions and be patient.  Take the time to thoroughly explain the nature of your business, vision and background. Feel free to request an estimated time frame for approval and respect that the projected date may slip a bit. It’s best not to call or email your lender frequently—in lending, no news is often good news.