GUIDE TO GOVERNMENT LOANS
SBA Loans are great for start-ups, purchase of equipment/real estate, or expanding a business. As we know SBA loans are government-backed loans that offer long-term repayments and low interest rates. The most common are: 7a loans, 504 loans, and microloans. Other loans tend to have a shorter processing time, SBA loans can take anywhere from 45- 60 days to process.
Here at Capifinders, we have created a step-by-step guide to help business owners get started, have a smooth process, and be able to obtain the funds necessary for the business.
1. ANALYZE YOUR ELIGIBILITY
The SBA has a general set of eligibility requirements that tend to overlap for their three most common loans. Below are the requirements:
Be a for-profit business in the U.S.
At least 3 years in business
No delinquencies on existing debt to the U.S. government
Have a personal credit score above 650
This loan has an interest rate that can either be fixed or variable. It also depends greatly on your credit score and the length of your repayment period. It has a repayment term between 10 - 25 years.
2. SELECT THE RIGHT SBA LOAN PROGRAM
Once a business checks if they are eligible, the next step would be to pick the right program. Each SBA loan program has its own purpose, meaning what the funds can be used for. Below we will go over how each program can be used for:
SBA 7a Loans
working capital (both short and long term)
purchase of equipment and real estate
establishing a new or existing business
SBA 504 Loans
Purchase or construction of: existing land or building, new facilities, machinery
Improvements of: land, existing facilities, and landscaping
SBA Microloans
Reparation, re-building, or improvements for the business
Working Capital
Inventory, supplies, and fixtures
3. OBTAIN THE RIGHT SBA LENDER
After finding which SBA program meets your business needs, you will need to find a trusted SBA lender to work with. There are different ways you can find the right lender for your business:
Going to your local bank or the bank you currently use for your business
Using the SBA website
Use a broker like Capifinders that can guide you through the process
Going to a commercial bank or credit union
4. COLLECT ALL NECESSARY DOCUMENTATION AND INFORMATION
After checking your business eligibility, picking the right program, and finding an SBA lender. You will need to prepare the right documents and information in order to get started. Below you will find a list of the most requested SBA documents:
Basic business and ownership information
Business Tax Return from the last 3 years
Personal Tax Return from the last 3 years
Business Financial Statements: Profit & Loss and Balance Sheet
List of business assets and debts
Personal Financial Statements (Forms are given by the SBA)
Business licenses, certificates, and leases
Any other document that the SBA program requests
5. FILL OUT AN APPLICATION
After gathering all the required information and documents, you will need to fill out an application that is requested by the SBA lender. Most of the lenders will fill out an application online to help speed up the process. In this application process, you might get asked for some type of collateral, depending on the program you are applying for.
6. PRE-APPROVAL OFFER
Once your application is submitted, it will go through an underwriting process where the SBA will determine whether you get a pre-approval offer or not.
If you do, the SBA will most likely ask for additional documentation in order to complete your process.
7. OBTAIN FUNDS
You sign the contract and obtain your funds directly into your business bank account within a few business days.
At first, the process can seem a little overwhelming, but by breaking it down step by step it becomes more simple to follow and complete. Even though the process takes some time, the final result of obtaining your funds will be worth it for your business.
If you would like to know more about the loan programs that are available click on the bottom button below.