[ad_1]
Working capital is the lifeblood of any business, but traditional financing can be challenging for small business owners and entrepreneurs to obtain. SBA loans were created to fill that gap. Contrary to popular belief, SBA loans aren’t just for start-ups or businesses that get turned down for conventional loans. SBA loans offer a variety of benefits, such as more flexible loan terms, and they can be a gateway to obtaining traditional financing in the future. In this article, we’ll tell you everything there is to know about SBA loans and how to apply for one.
Small Business Loan Application Requirements
The main requirements for 7(a) and 504 loan programs are set forth in SBA’s SOP, To be eligible for an SBA loan, applicants must meet all of these requirements during the application process, from the time of application through to loan closing and disbursement. Below is a list of key requirements:
- Must be an operating business organized for profit
- Located in the US and operating primarily in the US
- pay taxes to america
- Buy only American-made equipment and products (as much as possible) with SBA loan funds
- Must not exceed SBA small business size standard (including any affiliates) for your industry
- If your business meets the FTC’s definition of a franchise, this status must be disclosed on your SBA loan application.
- Must demonstrate an inability to obtain a similar amount of funding on reasonable terms from non-federal, non-state, or non-local government sources.
In addition to these basic requirements, you should also consider the following:
collateral and personal guarantee
SBA loans must be guaranteed by at least one person or entity. Business owners with 20% or more ownership stake in the applicant business must provide full personal guarantee.
If the guarantee is backed by collateral (the asset can be seized if the loan is not repaid), the SBA usually takes a second lien position.
Credit score and financial history of the owner
As mentioned above, SBA loans sometimes require a personal guarantee from the owner(s). As such, your personal finances are intertwined with those of your business. Businesses applying for an SBA loan must provide personal financial details of all individuals who are guarantors of the loan.
You may also need to give your SBA lender permission to check your credit score and history. If requested, you will also need to provide your personal tax returns for the last three years.
business plan and financial projections
Small businesses applying for an SBA loan must have a business plan With information about their target market, competition, marketing strategies, and a clear understanding of how the loan will be used to help grow the business. If you don’t already have one, you can get free help writing a business plan at one of the SBA Small Business Development Center-Find the one closest to you in Vermont or New Hampshire Here,
You will need to prepare financial projections for at least the next two years and provide business tax returns for the past three years. Sole proprietors can provide their own Schedule C.
So, what are SBA lenders looking for in your business plan and financial documents?
- Strong and stable cash flow that will cover your debt
- demonstrated good management
insurance requirements
If applicable, the following insurance policies may be required:
- Risk insurance on all assets pledged as collateral
- Marine insurance on any vessel
- flood insurance
- Life insurance for business capital
- product liability insurance
- Play Store/Host Liquor Liability Insurance
- disability insurance
- workers comp
- malpractice insurance
Common Mistakes to Avoid in Small Business Loan Applications
When applying for an SBA loan, it’s important to take your time and make sure that all of the information you provide is correct. Incomplete or incorrect information on the loan application may result in loan denial or delay. Union Bank has been one of the SBA’s preferred lenders since 1987, so we can help you through the application process. In fact, Union Bank’s Susan Perry was recently recognized as the “New Hampshire 504 Lender of the Year” for generating the most SBA 504 loans in New Hampshire in 2022.
Another common mistake is not to foresee potential obstacles. Business owners should address any potential roadblocks and explanations in the loan application.
Finally, you should definitely provide a solid business plan with your SBA loan application. a clear, concise business plan Required to demonstrate the viability of your business and the purpose of the loan.
Documentation Required for Small Business Loan Applications
If you’re wondering how to prepare for a small business loan application, one of the best things you can do before you start applying is to organize your documents. This will help the process move along as smoothly and quickly as possible. Some of these have been mentioned in previous sections, but for your convenience here is a complete list:
- personal and business tax returns
- Financial Statement and Balance Sheet
- business plan and financial projections
- Government issued photo identity card and proof of business registration
- Articles of Incorporation or Organization
- corporate bylaws and any amendments
- partnership agreement
- association bylaws
Small Business Loan Application Deadline
SBA preferred lenders like Union Bank can work quickly through the application process. However, small business loan application timelines will vary depending on the type of small business loan you are applying for and the complexity of your business and supporting documents. On average, SBA loans take about 45-75 days to close. The more prepared and organized you are before you start, the faster it will go. If you have questions about your SBA loan timeline, you can contact Union Bank’s business lending team at any time during the application process.
Steps in the Small Business Loan Process
Follow this step-by-step guide to small business loan applications so you know what to expect.
1) Get pre-qualified
Pre-qualifying for your SBA loan will let you know if you meet the eligibility requirements (before you waste time going through the entire process). It will also tell you how much you can borrow and set you up for a more streamlined application process.
2) Complete the SBA Loan Application
As mentioned earlier, it is very important to fill the application completely and accurately. Errors or missing information will delay the process.
3) Your application gets processed
We will contact you if we need any additional information or documentation to process your SBA application.
4) underwriting
At this stage of the process, we will verify the information on your application, such as income, assets, debt, and other details about your business and/or your personal financial situation.
5) Closing and Disbursement
Once you close your loan, the funds will be disbursed and you can get to work growing and expanding your business.
Resources for Small Business Owners in Vermont and New Hampshire
Union Bank is proud to be part of a large network of resources for small business owners in Vermont and New Hampshire. While we offer a number of financial products and services specifically designed for small businesses, we recognize that our customers may have other needs as well. That’s why we’re pleased to highlight some additional organizations that can help entrepreneurs succeed. By taking advantage of these resources in combination with Union Bank’s offerings, area small business owners can maximize their chances for success.
Apply for SBA Loans in Vermont or New Hampshire!
Don’t miss the opportunity to grow your small business. Use our article as a guide and begin the loan application process with Union Bank of India today. With locations in Vermont and New Hampshire, our dedicated team is ready to provide you with personalized assistance and support your financial goals. Contact Union Bank’s commercial lending team to learn more about our SBA loan options. Looking for additional resources for small business owners? See our recent article on “Resources for NH Women-Owned Businesses.”
[ad_2]
Source link
