SBA Loan Requirements
In the first part of this blog series, we left off stating that you have to submit a resume when you apply for a small business loan (SBA). We will continue to discuss some of the different requirements needed for a SBA loan. By following this list, you will be more than prepared for your loan application.
4. Business Plan
After you have handed over your resume, you also need to submit a business plan. Presenting your business plan is a great chance to prove to your lender that investing in your small business is a wise decision.
Your business plan should be written out and spell-checked thoroughly before you hand it over to your lender. As you share your business plan, you should highlight some important parts of your proposal for the lender to interpret.
For instance, you should mention these parts of your proposal verbally to your lender:
- Explain the Product and the Service You Will Provide
- Tell and Show Three to Five Years of Financial Projections
- An Analysis of Your Competitors
- The Unique Attributes of Your Business
- How You Plan to Use the Loan and What You Intend to Gain From It
In your business plan, it is important to showcase what your product or service is, how it differs from your competitors, and how you plan to make your business unique. Every business that is successful thrives on some attribute that makes them different from their competitors. And, aside from just the features that make your business different, you will have to show in data why your business model will be more successful than your competitors (if any).
5. Your Experience in Business and Your Intended Industry
For SBA loans, you do not need prior business experience. That means you could have held any job previously to your loan application for your business. However, before you have grand plans of quitting your job and opening your own business, a lot of knowledge needs to be learned. For instance, though you don’t need a business degree before you can be granted a loan, you need a general understanding about how to run a business. Managing a business goes beyond making a product and selling it. You have to know the legal implications of selling a product, hiring staff, and renting a space for your business. You also will need to have a full comprehension of budgeting and how to maintain your business, despite the expenses for labor, equipment, and supplies. Not only that, but you have to keep in mind the cost of your business’ rent and building maintenance expenses.
Because owning a business can be such a complicated process, you should learn how to run a business, before actually owning one. Though SBA loans don’t require business experience, you should have an understanding of the processes and demonstrate to your lender that you fully comprehend your responsibilities as a business owner.
6. Credit Reports: Personal and Business
Your credit score is one of the most important aspects of your application. This one number is important because it tells the lender how long you have been making payments and how long you have been making regular payments on your personal finances. Having a great credit score gives the lender reassurances that you are a trustworthy borrower.
These are the scores and what they mean:
Excellent: 750 and Above
Bad: Below 600
Don’t know your credit score? There are plenty of avenues where you can look up your credit score. If your credits score is a little low right now, you may need to give your application some time. If you make regular payments, you can boost your credit score. However, keep in mind that raising your credit score number is not a swift process. You may have to wait a few months to increase your credit score.
If you are looking for a loan to launch a brand new business, your business credit report will need to be included in your SBA application. Every business has a business credit report, which evaluates how well your business paid back vendors, lenders, ands suppliers.
At Merchant Flow Financial, we can help guide you through your loan process. With our help and expertise, we might be able to show you how to successfully apply and receive a loan. If you are a small business owner hoping to expand your business, contact us today.