What is an SBA Loan, and What Do You Need

SBA, which stands for a small business loan, is how many of the businesses you know and love have funded their projects. Most people don’t have the money to fund their fledgling businesses. Luckily, banks and loan offices are able to give small business owners a loan to initially start their business. These loans tend to be long-term, low-rate, government-guaranteed loans for qualified borrowers. SBA loans are advantageous for business owners because they offer far more flexibility than other loans. Some loans are restricted to purchasing certain things or for specific purposes. For SBA loans, business owners can buy anything from equipment to real estate, or they can settle existing debt.
In this blog, we will discuss what you need to successfully complete your small business loan application and gain the capital you need to support your business.

1: Meet SBA Size Standards

A small business loan is just that — a loan for a small businesses. In order to get a loan for your business, the size of your business will be inspected. Based on your industry, the number of employees a small business should have will vary. For instance, a business can have anywhere from under 100 employees to under 1,500 employees. Ultimately, what industry you are in will determine how many employees constitutes a small business.
Your business will also be inspected by its revenue and its net worth as well. Typically, small businesses will make anywhere from $.75 million to under 38.5 million. Revenue quantity above this number would no longer be considered a small business.
The net worth value of a small business should NOT exceed $15 million. Also, the company should not exceed $5 million in net annual income in order to be considered a small business. Once your bank or loan office confirms that your business is indeed a small business, then you can move onto your SBA application.

2. Background Information

For your SBA loan application, you will need to submit information about your personal background. This information includes addresses, citizenship status, and your criminal record. In most cases, lenders will have their own forms that you will need to fill out your personal information on. However, some SBA loans, microloans, and CAPLines use this form.

Why is this information important?

Small businesses are at a higher risk of not paying back their loans than large corporations. This is because most small businesses are opened by a few people, sometimes one, singular, middle-class owner. Capital can be scarce for small businesses, but with large, well-funded corporations, there is not much loan risk. Because banks and loan offices are offering money they may or may not get back, they will ask for a lot of information and, sometimes, ask for some of your assets to use as collateral. Loan offices will look through your personal information that “throws up any red flags.” This can be anything from criminal offenses, debts, and the number of dependents you have. Of course, a criminal record doesn’t automatically disqualify you from SBA financing, unless the offense was a felony involving violence or dishonesty. Then, a loan officer may look at your application more closely and may have you apply for a more secure loan.

What loan offices look for is any reason that you are not trustworthy to make regular payments. Of course, they will look at your credit score, but a good credit score isn’t always enough to gain a small business loan. It also is important to keep in mind that anyone who owns more than 20 percent of your business will have to sign a personal guarantee on the loan application and submit their personal information to your personal loan officer. This is an added safety measure by your bank or loan office to ensure that, if you can’t make payment, the other owner of the business will step in.

3. Submit Your Resume

As you are submitting your personal information, you will also need a resume to present to your lender. Anyone who has more than 20 percent ownership of the business requesting the loan must submit a resume. Your resume will giver your lenders an idea of your business background and if you have any experience in the industry your business will be in.
Your resume is important for your small business loan because it gives your lender a better idea of your employment history and whether or not you are responsible to work and be your own boss.

Merchant Flow Financial

At Merchant Flow Financial, we can help you get the business loan you deserve. With our help, your dreams of owning a business can be a reality.

Stay tuned for the second part of this blog series.

Contact Merchant Flow Financial today!