To successfully secure a Small Business Administration loan, it is important to fiercely prepare in advance of submitting an application to a lender. Lenders are more likely to approve a loan for someone who appears confident, prepared, trustworthy and knowledgeable. Educating yourself on the ins and outs of SBA loan approval is key to obtaining that much-needed cash that could help your dreams come true.
Prepare, prepare prepare
One of the most important factors in SBA loan approval is a sound business plan that demonstrates exactly how you will earn money. According to All Business, lenders appreciate details. Beyond a plan for generating revenue, you will need to provide a comprehensive budget plan that shows the loan officers exactly how you will spend the money you are requesting . Lenders will also want to know with whom you plan to partner and who you will hire as your suppliers, as you will likely be using the loan money to do so. Make sure you know all of this information before applying.
The SBA explained that lenders will also require you to provide your personal and business credit history as well as cash flow projections for one year or more. Also, don't forget that your partners matter, too. The lender will want to check each of their personal and business credit histories.
What lenders value
Globe One, an online banking community, explained that lenders take a lot of factors into consideration to determine how high of a risk lending to you may be. The industry you have chosen to enter is one factor, as certain types of ventures (like restaurants) are much higher risk than others.
Lenders also value collateral. They want to see that you are in a position to the pay the loan back, meaning you have significant assets. The SBA did say, however, that if lack of collateral is your only issue, it probably will not hurt your ability to get a loan.
Another important factor in securing a loan is having your own equity invested in the business. As All Business emphasized, how can a lender trust that you truly believe in your business if even you are unwilling to invest in it?
The SBA recommended educating yourself on all the details of the loan approval process before speaking with a lender. That way, you will appear intelligent and well-informed during your meeting.
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