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Applying for a Small Business Administration (SBA) loan can take months from start to finish. There’s the application to fill out, forms to complete, documents to get together — and government-issue jargon to translate. Set aside at least a few hours to apply, and consider working with a business partner, friend or SBA loan expert to make it easier.
If you’re looking to take out an SBA loan specifically to help your business that was forced to close due to the coronavirus outbreak, see if you qualify for the SBA Economic Injury Disaster Loan (EIDL) Program. An EIDL doesn’t work like typical SBA loans — the short application should take less than a half hour to fill out. And it’s supposed to be faster — taking days or weeks to find out about approval and get your funding instead of months.
The SBA Paycheck Protection Program (PPP) reopened to businesses in January 2021 after the Economic Aid Act passed in late December 2020. It has an end date of March 31, 2021. If your business borrowed a PPP loan, you can now apply for PPP loan forgiveness. And if your business still needs funding, you can apply for a Second Draw PPP loan.
Check out our guide to loans available to businesses impacted by COVID-19 for some non-SBA options for your business.
These steps cover the process from what you need to do before you apply, to completing additional forms that might be required with your application.
Before you even begin your application, make sure your business is eligible. The SBA might be open to businesses that don’t typically qualify for loans, but it still has strict eligibility criteria. The SBA’s most general requirements include:
and loan packaging typically can’t qualify
Your lender or program might also have additional eligibility requirements. Your business could qualify for an SBA startup loan through the 7(a) program if it doesn’t meet the time-in-business or credit score requirements.
Some SBA lenders also require collateral in the form of the business or business owners’ assets. The collateral typically backs the portion of the loan that the SBA doesn’t cover — typically between 15% and 50% — with your personal assets
Worried you won’t get approved? Here are the top reasons the SBA rejects applications:
Just because most businesses go for the SBA 7(a) program doesn’t necessarily mean it’s right for you. Choose a program that works best for your business. Here are some of the most common SBA loans.
The SBA doesn’t provide loans itself. Instead, it works with lenders who provide the loan and process the application. It’s the lender that sets credit requirements and determines whether or not your business is eligible.
You have a couple of options when looking for the right lender: Searching for lenders on your own or using a referral service. Referral services like SmartBiz are great for businesses that aren’t experienced with lending or don’t have the time to do a comprehensive comparison themselves.
However, they’re typically limited to their network of lenders, so you won’t be choosing from as big a pool. You also might have to pay fees for their services, making it more expensive.
If you’re looking for a lender on your own, ask yourself the following questions when comparing lenders:
Once you’ve found the right lender or referral service, it’s time to start gathering the documents you need for the application. While it depends on the lender and type of program you’re applying to, most business owners will need to provide the following information at a minimum:
If any business owner owns 20% or more in another business, they will likely need to provide details on that business as well, especially financial statements. If you intend to buy another business with your loan, you’ll also need to provide financials on that business, including tax returns and the purchase agreement.
Like with rates, credit requirements and documents, the application also varies from lender to lender. However, a lot of the information should already be in your business plan. Be prepared to provide:
No SBA application is complete without several different forms. Depending on your loan type, business type and even your business owners’ personal histories, your business will likely need to fill out at least two forms. Here are some of the most common forms SBA businesses need to fill out.
All SBA 7(a) and Community Advantage program applicants need to fill out the borrower information form. It provides the SBA and your lender with basics on both the business and all owners and affiliated businesses or investors.
Your lender uses this form to check your business’s eligibility, like making sure that there are no conflicts of interest. It also uses this to determine whether or not your business or its owners need to fill out other forms.
All SBA 7(a) and 504 applicants are required to fill out a Personal Financial Statement for each business owner or cosigner. It goes into detail about each owner’s household assets and liabilities. These include debts, real estate, life insurance policies and even the value of that silverware set you inherited from your grandmother.
Navigating this form is a little complicated, especially if you aren’t an accountant. You might want to check out our step-by-step guide to make sure you’re filling in the fields correctly.
This form is actually the SBA’s way of protecting borrowers from paying unnecessary fees — or too much for legitimate services. All applicants applying for a 7(a), 504 or disaster assistance loan need to submit this form if they received help from an agent.
The form itself is easy, but navigating the SBA jargon isn’t for amateurs. In fact, figuring out who needs to complete it — if anyone — typically takes more time than anything else.
All business owners and cosigners need to complete a Statement of Personal History if even just one has had a run-in with the law. Basically, it asks for details on any past or current criminal convictions, including recent arrests for a misdemeanor.
Your business isn’t eligible for an SBA loan if any owner is involved in criminal proceedings — and no, they can’t sell their shares to become eligible — but it’s possible to qualify even with a felony past. The SBA decides on a case-by-case basis.
SBA disaster loans are only available by applying on the Small Business Administration’s website.But if you’re interested in a non-disaster SBA loan, you can apply by clicking on one of the lenders in the table below.
Several SBA programs offer real estate loans, most commonly through the 7(a) and 504 programs. While the application is similar to other 7(a) loan applications, your business needs to take some extra steps to get all of the documentation together — like getting the property appraised and evaluated for potential environmental issues. On top of the other eligibility requirements, you’ll also need to:
When it comes to documents, lenders typically ask for the following:
SBA loans are one of the least-expensive options out there for entrepreneurs and young businesses — and it’s catching on. Since 2013, the percentage of SBA loans that went to new businesses went up by 12 percentage points, from 26% to 38% of all SBA loans.
While applying for a startup loan is nearly the same as any other 7(a) loan, there are a few key differences.
Not sure where to start looking for funds? You might want to check out these SBA programs:
Applying might be the most intensive part of the application process, but it’s not quite over once you submit all of your documents and forms to your lender. Here’s what you can expect to happen after you’ve turned everything in.
After your lender has had a chance to review your entire application, it’ll send your business a letter of intent (LOI) if it qualifies. This can happen around a week or two after submitting your application. Your LOI tells you your business’s potential rates and terms and how much your business is eligible to borrow.
If you’re satisfied with these potential terms, sign and return your LOI to your lender as soon as possible so it can get started on underwriting your loan.
Your lender might also ask for a deposit of around $2,000 along with your signed LOI.
It can take as long as two or three weeks for your lender’s underwriting team to review an SBA application — it’s as intense process for them as it is for you. Typically, there’s nothing for you to do but wait, though you might be asked to provide additional documents or details on your business’s financials.
If the underwriters give your business the green light, you’ll get a commitment letter that gives you more details about your loan terms. If you accept these terms, you might have to put down another deposit, usually 5% of the loan amount or $5,000, which you’ll get back if you end up backing out of the deal.
Closing can take a while for loans that require appraisals or reviews by third parties, like real estate loans. Once your lender has finalized every last detail, it’ll send your business the loan agreement. At this point, you’ll review and sign the agreement and pay any closing-related fees and the SBA guarantee fee. After that, your business will receive the funds.
An SBA loan is a small business loan that’s partly backed by the government. This means that if you can’t pay back the loan, the government will take part of the hit instead of your lender.
It also means that it’s less risky for lenders to take you on as a borrower, opening the doors to lower rates and small businesses that have had trouble qualifying for a traditional loan in the past. In fact, your business needs to prove that it’s had trouble qualifying for financing in the past to even qualify.
Through the SBA program, small business owners can apply for up to $5 million in term loans and lines of credit to cover working capital costs or large purchases — like real estate or equipment. It also offers microfinancing to small businesses that need just a bit of funds to get their ball in the game.
SBA loans might not be as expensive as other forms of financing, but it’s certainly not the quickest option either. It can take several months from start to finish and hours of filling out forms and gathering documents. But if your business is committed to sticking it through, SBA loans can provide a real opportunity for small businesses to grow in a way that other types of business loans simply can’t — both in terms of cost and size.
Not sure if an SBA loan is for you? Read our business loans guide to learn about other options and start comparing lenders.
Answers to commonly asked questions about applying for an SBA loan.
It varies based on the number of forms your need to fill out, how many documents you need to provide, what types of third-party appraisals you need to arrange and how long it takes to get everything together.
Just filling out the application can take anywhere from a week to a few months. Typically, you’ll find out if you’re preapproved one to two weeks after submitting everything to your lender. Official approval from the underwriting team can take another two or three weeks after that.
Planning ahead can make all the difference when you need your funding by a certain deadline. Using a referral service, having the right documents at arm’s reach and letting all relevant owners and investors know that they might need to make time for the application could seriously save you some time.
It doesn’t, though there are some government grants that businesses can apply for. These are typically very time-consuming applications, come in small amounts and are very difficult to qualify for — especially if your business isn’t involved in developing science or technology that could be useful to the government. You might want to take a look at our business grants guide to learn more about how they work.
You typically only need to fill out SBA Form 355 if the SBA requests it or you’re contesting your affiliation with a business. The SBA will let you know if you need to complete this form after you’ve turned in your application.
To learn more about when this form is necessary, read our step-by-step instructions for filling out the small business size determination form.
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