9 Simple Steps for Preparing an SBA Loan Package Successfully

Successfully getting a giant pile of money into your business requires properly preparing an SBA loan package. After you have applied to an online lender it is time to put together the SBA loan package.

Experienced business owners all know that SBA loans are the most affordable. All thanks to the SBA loan guarantee, the best interest rates, and longer loan term durations. It’s no wonder every business wants them. Even so, it can be a challenge to get an SBA business loan because of everything that needs to be provided in the SBA loan package.

Some business owners are confused about how the SBA loan programs actually work. In simple terms, the business owner applies to an online lender, and the lender sends the SBA loan package to the SBA for approval. In this process the SBA guarantees up to 85% of the loan amount to protect the lender from the borrower not repaying the loan.

Also, the lender wants to be certain that the borrower will repay the other 15% of the loan amount. Therefore, the lender also has requirements that the borrower must meet. That might mean additional collateral or just higher personal and business credit scores.

SBA loan types and loan limits: SBA Micro Loans up to $50,000. SBA 7a up to 5 million dollars. SBA 504: $125,000-$10 million

9 Steps for Preparing Your SBA Loan Package Successfully

Heritage Business Loans has prepared the following list of steps to take for your business to be approved by the lender and by the SBA.

1. Research About the Available Loan Options

SBA microloans are for startup or new businesses that only needing $50,000 or less. Whereas the popular SBA 7a loan and SBA 504 loans require 2+ years of business operation and must be profitable. See below for more details.

SBA microloans are for startup or new businesses that only needing $50,000 or less. Whereas the popular SBA 7a loan and SBA 504 loans require 2+ years of business operation and must be profitable. See below for more details.

2. Determine Your Eligibility for SBA 7a and SBA 504 Loans

Check these basic lender and SBA eligibility requirements:

  • Have a “Good” 670 or better FICO credit score for all corporate owners
  • Meet the SBA definition of a small business, which means having 500 or fewer employees and less than 1million or less than 30 million in revenue (depending on industry).
  • Operate within a “legitimate” industry. Which excludes multi-level marketing, cooperatives, gambling, rare coins, religious, non-profits, money lending, real estate investments, illegal activities.
  • Business must be profitable and located within the U.S.A.
  • Comply with all SBA rules
  • Generally, the business must have been operating for two or more years and be profitable. SBA Microloans have different requirements.
  • No loan defaults or debt obligations

3. Identify Your Explicit Financial Needs

What business needs require funds and how much for each of those needs? If you can’t clearly state why money is needed and how much is needed, stop right now and figure it out.

4. Statement About the Purpose of The Loan

Your online lender will make specific recommendations about how to improve your statement of purpose once you have presented it to the lender. The lender wants your loan to be approved as much as you do, but they won’t write your SBA loan package for you.

The SBA needs evidence that the business owner has invested their own money and time into the business. In other words, make the SBA feel like you are fully committed to the business and its success. Here is a short list to guide you:

  • The challenges the business faces and how the SBA loan will resolve those challenges.
  • A summary description of the business plan and how the loan will enable the business plan to succeed.
  • Include a statement from the business owner(s) on how their actions will make the business more successful.

5. Business Plan (Excerpts)

The point here is to assure the SBA and especially the lender that the business can repay the loan. The lender’s loan officer wants to make loans but doesn’t want to be fired for making a bad loan. This isn’t a complete business plan, but you can reuse parts of your business plan to complete these steps. So, here is what is needed:

Stack of documents used to create an SBA loan package.
  • Describe the business and why it exists. How is your business able to compete in your marketplace?
  • Predict the future of your business. How will it grow? What accomplishments will be made in the near term and during the term of the loan?
  • Describe the products and/or services the business provides.
  • Who leads the organization and how do they manage the business activities?

6. Business Financial Statements

You have already explained how the business produces income, now you must show the data supporting your income expectations. Here again, you are trying to impress the lender with your ability to repay the loan. This part of preparing an SBA loan package is easier for established businesses to produce because they have the data. Whereas startup businesses will have to make educated guesses. However, the loan officer will easily see if your projections are too good to be true.

This is what needs to be included

  • Cash income
  • Income Statements: profits and loss reports
  • Expense statements
  • Balance sheets: business net worth and value
  • Owner’s Personal Financial Reports – individual net worth, including debts

7. Fill Out the Necessary SBA Forms

You must fill out this list of SBA loan package forms. Once they are completed send them to your online lender for review.

  • SBA Form 1919 – existing indebtedness, information about current or previous government financing, and other topics. The information also facilitates background checks.
  • SBA Form 912 – basic contact and business information
  • SBA Form 413 – Personal financial statement
  • SBA Form 159 – Fee Disclosure and Compensation Agreement

8. Prepare A Draft SBA Loan Package

Put all of the documents created in the previous steps into a package for your lender to review.

9. Submit the SBA loan Package

When the lender’s loan officer is happy with everything in your loan request it is time to submit the package to the SBA.

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