ACE
Member
I will be finalizing a $35K SBA loan later this week. I have been working on getting financing for 9 months. I have bankers and finance companies tell me no at least a dozen times. I had a chapter 7 bankruptcy 6 years ago and refuse to go to the sharks or let anyone co-sign. I am posting this in hopes that it might save someone else in a similar situation some of the time and frustration I was subjected to. You can go read all about SBA loans at www.sba.gov so I will give a quick overview of the program and focus on the valuable information the SBA doesn’t tell you.
Overview:
The SBA program is one of the few government programs that actually pays for itself and seems to work. The SBA guarantees business loans made by leaders for business that are not qualified for a traditional bank loan. The SBA works with all types of business and backs loans from a few thousand into the hundreds of millions. Private lenders working with the SBA have the authority on whether or not to issue a loan and you cannot apply directly to the SBA. Lenders cannot charge more than a couple points over prime. Rates being what they are, allot of leaders do not have any interest in SBA loans because of low profitability. An SBA loan might be ideal if you have a solid business plan but you credit or collateral is a little week. You still have to make a banker believe you will repay the loan. Even if they don’t losse money, the last thing a banker wants to do is liquidate a business. The SBA just lowers the risk factor for a lender.
Getting ready:
You might very well be qualified for a traditional bank loan. If so, the process will be much faster than a SBA loan and you can shop it around for the best rate. You will have to go down to the bank and apply for a business loan either way. Unless a traditional loan is a slam dunk (more than enough collateral and perfect credit), It is important to be well prepared. This will show the lender you are serious about your business. Here is what you need before you talk to a banker:
Clean up your credit, Pull you repot from all 3 major agencies and contest or pay any items currently in collections. This is actually relatively easy. https://www.annualcreditreport.com
A Business Plan. Here is a link with a template and some examples: http://www.business.ku.edu/kusbdc/bizplan.htm
Cash Flow Statement, Income Statement, Balance Sheet http://www.business.ku.edu/kusbdc/accounting.htm
Last 3 years full tax returns
Personal Financial statement, www.sba.gov/sbaforms/sba413.pdf
Finding the right Lender:
Ask around and find out which banks in your area are writing the most small business loans. You probably want to avoid the big national banks. Make appointments with a few loan officers. Insist on talking to the person that processes business loans. Conduct a short interview with each banker and do not give them anything on paper at your first meeting. Here are good questions to ask: How many business loans this size have you written in the last 6 months? How many SBA loans have you written in the last 6 Mo? Tell them about your business how big of loan you want and for what. Be enthusiastic about your business but make them aware of any issues with credit history and collateral. Get the applications form them and decide whether or not to return. If they are evasive with your questions or tell you need to fill out paperwork before they answer your questions looking for another lender. Don’t give up if your application is rejected. I had to apply to 5 banks before I found someone to send it off to the SBA. SBA loans are 10 times more paperwork then traditional loans and less profitable for the banker. In my case I knew the SBA would probably approve if I could find a banker to that would send it off so I didn’t give up.
Overview:
The SBA program is one of the few government programs that actually pays for itself and seems to work. The SBA guarantees business loans made by leaders for business that are not qualified for a traditional bank loan. The SBA works with all types of business and backs loans from a few thousand into the hundreds of millions. Private lenders working with the SBA have the authority on whether or not to issue a loan and you cannot apply directly to the SBA. Lenders cannot charge more than a couple points over prime. Rates being what they are, allot of leaders do not have any interest in SBA loans because of low profitability. An SBA loan might be ideal if you have a solid business plan but you credit or collateral is a little week. You still have to make a banker believe you will repay the loan. Even if they don’t losse money, the last thing a banker wants to do is liquidate a business. The SBA just lowers the risk factor for a lender.
Getting ready:
You might very well be qualified for a traditional bank loan. If so, the process will be much faster than a SBA loan and you can shop it around for the best rate. You will have to go down to the bank and apply for a business loan either way. Unless a traditional loan is a slam dunk (more than enough collateral and perfect credit), It is important to be well prepared. This will show the lender you are serious about your business. Here is what you need before you talk to a banker:
Clean up your credit, Pull you repot from all 3 major agencies and contest or pay any items currently in collections. This is actually relatively easy. https://www.annualcreditreport.com
A Business Plan. Here is a link with a template and some examples: http://www.business.ku.edu/kusbdc/bizplan.htm
Cash Flow Statement, Income Statement, Balance Sheet http://www.business.ku.edu/kusbdc/accounting.htm
Last 3 years full tax returns
Personal Financial statement, www.sba.gov/sbaforms/sba413.pdf
Finding the right Lender:
Ask around and find out which banks in your area are writing the most small business loans. You probably want to avoid the big national banks. Make appointments with a few loan officers. Insist on talking to the person that processes business loans. Conduct a short interview with each banker and do not give them anything on paper at your first meeting. Here are good questions to ask: How many business loans this size have you written in the last 6 months? How many SBA loans have you written in the last 6 Mo? Tell them about your business how big of loan you want and for what. Be enthusiastic about your business but make them aware of any issues with credit history and collateral. Get the applications form them and decide whether or not to return. If they are evasive with your questions or tell you need to fill out paperwork before they answer your questions looking for another lender. Don’t give up if your application is rejected. I had to apply to 5 banks before I found someone to send it off to the SBA. SBA loans are 10 times more paperwork then traditional loans and less profitable for the banker. In my case I knew the SBA would probably approve if I could find a banker to that would send it off so I didn’t give up.
