Apply for a small business loan

• Aug 14, 2022
• |
• BestBizFinder

Apply for a small business loan

Once you've found the right lender, you're ready to start gathering materials for your small business loan application. The first four steps deal with obtaining credit approval from the lender, while steps 5 and 6 are usually provided after credit approval, and are used to confirm your SBA eligibility for the project.

Apply for a small business loan

To apply, you will need:

Step 1: Write a history and overview of your business

An important component of your loan application is to help the lender understand your business and the project for which you are seeking financing. You can do this by writing your work history. Here, you will explain when and how you established the business, how the business has grown over the years, and the main challenges and competition you have faced. Your narrative should also explain why you are seeking an SBA loan and what business goals the SBA loan will help you achieve. You should specify the amount of money in the loan proceeds you are seeking along with details of how the money will be spent.

Step 2: Include the required financial data

All SBA loans require you to submit an updated profit and loss statement or earnings report within 120 days for 7A/504 (180 days) for an SBA Express loan, which allows business owners to receive a decision from their lender faster, usually within 36 days (hours) from the date of your loan application. This gives the lender and the SBA a snapshot of your business, so you'll also need to include a balance sheet with a breakdown of assets or liabilities.

You will need to provide projected financial statements, which should include a complete accounting of your projected income and finances for the upcoming year. The Small Business Administration also asks that you include a written explanation of how you arrived at these expectations — and how you expect to meet them. If you use accounting software, you can use it to generate this data. Accounting professionals can also provide necessary data and timelines.

Step 3: List all property rights and affiliations

Any business with subsidiaries, affiliates, franchisees, or equity owned in other companies must include a complete list of these arrangements with the loan application. Not many businesses will have information to include here, but it's important to be precise: If you or any of your partners have any ownership interest in another business, it should be listed.

Businesses planning to use an SBA loan to finance business acquisitions also need to provide supplemental information about the business they plan to acquire, including:

·       Profit and loss statement and balance sheet

·       The last three years of your federal income tax returns

·       The purchase agreement or take-back agreement, including the terms of sale and a statement of the reason for selling the current owner

·       Request price and schedules for inventory and physical assets such as furniture, equipment, and fixtures

Step 4: Copy important business documents

Your business loan application must also include copies of these documents:

·       Certificate or commercial license

·       Federal business and personal income tax returns for the past three years

·       Any previous loan applications you have made to any lender

·       Personal CVs of each owner or partner

·       Your current lease agreement or a letter signed by the landlord stating the terms of the lease

These are items for SBA eligibility, which may be requested from your lender after your loan credit is approved:

Step 5: Then Complete the SBA 7a Borrower Information Form

Filling out Form 1919 is the first step after credit is approved for an SBA 7a or Express loan (not for SBA 504). This form includes the basic questions about you and any business partners, including:

·       Ownership percentage in the business

·       Gender, race, ethnicity and other demographic information

·       US citizenship status

·       Details of any criminal record

The application includes a questionnaire to ensure that you meet the eligibility criteria for the loan you are applying for. Depending on your answers, you may need to submit additional forms included in the application. For example, if you plan to spend more than $10,000 on construction, you will need to fill out an SBA Form 601. Before you begin applying, make sure you understand the types of SBA loans and their eligibility criteria.

Step 6: Attach SBA Personal Record Forms

All business partners, who own 20% or more of the business, need to complete a personal financial statement (either your lender's form or SBA Form 413) which is used to assess creditworthiness. In cases where you have an employee managing the day-to-day operations of the company, they must complete the form as well. If any applicant has a previous criminal charge on SBA Form 912, a personal history statement is required regarding your background and any criminal record (either a felony or a misdemeanor). You and your partners will need to provide detailed accounting of your personal assets and liabilities, including real estate, stocks, bonds, and outstanding debts or tax liens.