The Small Business Administration’s loan process

If you or your company are in the market for a business loan, your first stop might be to the Small Business Administration’s (SBA) website for some basics on SBA loans. If, after that visit, you’re still not really sure how they work or how to go about applying for one, there are some tips and common guidelines that can simplify and speed up the process to avoid getting declined for both SBA loans and disaster SBA loan.

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First, let’s define what an SBA loan is. The SBA doesn’t actually lend businesses money. Instead, a bank makes the loan, which is backed by the SBA. This allows the bank to take less risk than they otherwise might. The SBA does, however, have several programs to help business owners obtain financing from these banks. This means that if you are looking for a business loan and don’t qualify for a traditional bank loan, perhaps because you don’t have the collateral or years in business to justify the loan, the SBA can help – although you still need to work with a bank.

Preparation is key, and it’s important to understand some of the criteria that might influence your eligibility for an SBA loan or disaster SBA loan. These include credit factors, cash flow projections, and your debt-to-worth ratio. Collateral and working capital are other factors that may impact eligibility. And remember, your personal credit history and credit score can also be important.

Another very important but often overlooked area is your good standing with your State Treasury and the IRS!

And don’t forget the most important document – your business plan with at least three years of financial projections, a view of what you’ll do with the money from your loan, and solid proof that you know your industry and target market. This is particularly important for start-ups that don’t have a financial history. The bank will base its decision on your industry experience and future plans.

Learn more about SBA loans and other funding options with our e-learning resource guides!  

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Joseph Ferriolo

Director at Wise Business Plans®
Joseph Ferriolo is the Director of Wise Business Plans. He has overseen over 15,000 written business plans during his tenure, raising over $1BN in funding and providing 30K+ consulting hours for startup companies.

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