6 tips for startups looking to apply for SBA loans

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Startup loans are harder to get approved because the new business has yet to prove a successful track record or a credit profile. But this doesn’t mean that there aren’t options available for a new business owner. In fact, applying for an SBA loan may be one such option, as they are partially guaranteed by the government, making them less risky for the lenders. And while the application process may involve more paperwork and more waiting time, the better terms are worth the long process.  Here are just some tips that will make the application process easier for any business owner.


1. Do your research early

Make sure to go into the explanations and resources available on the SBA website. You can access some great templates to help you get started. Most importantly, take the time to patiently review the different requirements for the available loans. It will streamline the process considerably if you’re mindful of the requirements from the start.


2. Apply through an SBA preferred lender

As the Small Business Administration is part of the federal government, they have a Preferred Lender Program available for banks that want to process and approve loans on their behalf. In other words, if a certain bank has proven its ability to successfully process and service SBA loans, they will benefit from faster approval processes and additional resources for their business customers.


Reaching out to a bank that isn’t a member of the Preferred Lender Program means that they would have to process your loan application internally first, after which they would send it to an SBA processing center for final approval.


3. Make your case with a strong business plan

Every application should open with a strong business plan that makes the case for supporting your business. Make sure to present your prior business knowledge, your business model, projections of cash flow for the next two years, and secondary revenue streams you can pursue if sales don’t meet your expectations. Don’t forget to include your capital needs and key monthly expenses.  Finally, make sure to break down the risks associated with your business - also in the context of your location - and make plans to counter these when or if they appear.


4. Update your bookkeeping and make it accessible

You can make your business more loan ready by digitalising and updating your bookkeeping. It’s a lot easier to make your case in front of a lender when you can easily provide financial statements and generate reports to support your cash needs projections.


5. Organize your personal finances and keep them separate from your business accounts

If you’re a business owner looking to fund your early days, it’s important to remember that one of the key aspects lenders will research is your own credit score. That’s why keeping your personal finances in order is paramount before starting the application process for an SBA loan.


Finally, make sure you open a separate bank account for your business and apply for a secured credit card under your business name as soon as possible. This will allow you to slowly build the credit score for your business as well.


6. Free up funds for a down payment

You can increase your chances of getting an SBA loan by making sure you have enough finances at hand to cover 10% as down payment. This sum will be considered as your personal cash investment in your business. Of course, a larger sum may improve your chances of approval the loan.


At the end of the day, the application process for an SBA loan reflects the day-to-day work of running a business. You show up early, you do the work as best as you can, and you hope the lender (or the customer) will be happy with you.


If you’re looking to consolidate your debt or restructure your loans, get help from a business debt expert like Creditors Relief. We’re willing to advise you with your debt relief options and our review process is free. Sign up here.

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