5 Attributes of a Winning SBA Loan Application

Business partnership meeting. Picture businessmans handshake. Successful businessmen handshaking after good deal. Horizontal, blurred

If you’ve never applied for financing before or have been turned down for a conventional business loan, you may wonder what’s involved in an SBA loan application. To help you better understand the process and up your chances of securing the loan you need, here are five tips for a winning loan application.

  1. Lean on your Lender

A critical success factor in securing a loan is your relationship with your lender. Financing is a big decision for both parties. But by working through this process together – even before you start your application process – you’re chances of getting the SBA loan you need are much better than if you try to navigate the process alone.

One of the reasons for this is that an experienced and approved SBA lender will know exactly what elements need to come together over time to improve your approval chances.

  1. Get the Eligibility Question out of The Way

Because SBA loan programs have different eligibility requirements than conventional loans, one of the first conversations you’ll have is about which loan you may qualify for. Several factors come into play here – the size of your business, use of the loan proceeds, and even where your business resides. Collateral is another factor. It may or not be required. For example, if you have a strong business plan and financial statements, collateral is often not a prerequisite.

  1. Work on your Fiscal Health

It’s a good idea to start working and monitoring your business’ fiscal health long before you apply for a loan. Work with your lender well in advance of doing the more serious loan paperwork. They can help you understand what aspects of your fiscal health you need to concentrate on to help bolster your application once the time comes.

Consider your personal credit score and work on establishing and building your business credit file (your lender will pull these reports during the application process). Look at your balance sheet and profit and loss statements, what can be done to improve sales or profits and offset or reduce expenses?

What about your cash flow situation? Is it stable? What are your projections? It’s a good idea to start projecting out cash flow for the next 12 months. Not only do lenders require it, but the exercise will provide useful insight into any potential cash pitfalls and give you time to put measures in place to mitigate them. Cash flow is key factor that any loan officer will take into consideration.

If you have debt, credit card or otherwise, try and reduce or eliminate it altogether.

  1. Prepare your Business Plan

Every business needs a plan, but it’s particularly important to your loan application. The plan demonstrates that you have a solid market awareness, a keen eye for where your business and products are positioned in that market, any competitive threats or operational weaknesses (and how you’ll overcome these). Your plan should also outline why you need financing, what the anticipated results will be and, of course, how you’ll repay that loan over time.

  1. Gather Documentation

This is another step that shouldn’t be rushed. Don’t leave it until the day before your application is due to be submitted. Key documents you should start gathering in advance include:

  • Income tax returns, both personal and business, for the past three years.
  • Financial statements – Prepare your financial statements (balance sheet and profit and loss) for three years and forecasts (cash flow and profit and loss) for at least 12 months.
  • Bank statements for the past 12 months.
  • Legal documents – business license and registrations, articles of incorporation, any contracts you have with third parties, franchise agreements, and commercial leases.

With multiple loan options, low interest rates, and low down-payments, the payoff for all this preparation is significant. And you needn’t go it alone, First Bank SBA professionals have years of experience helping small businesses navigate this process seamlessly while providing financial expertise even after the loan has closed. Contact us for more information.