What are SBA Loans?
SBA loans are loans given out for further growth of small businesses. SBA loans are different from other loans in that before you can qualify for one, the Small Business Administration must guarantee you.
The “SBA” meaning Small Business Administration does not mean that the administration actually gives you the loan. The SBA only back up the bank loans and by so doing reducing the risk the lender has to suffer.
The Small Business Administration helps entrepreneurs improve and grow their businesses since they enable these small entrepreneurs get easy access to small business loans.
This guarantee given by the Small Business Administration reduces the high credit criteria that lenders will hitherto require, thereby making this loan available to all business types.
Benefits of SBA Loans
The SBA loan is suitable for various business types providing financial aid to a wide range of purposes. It gives you access to the following:
- Loan amount of $5,000 to $5,000,000
- Loan duration up to 25 years
- Interest rates as low as 6%
- Quick loans as fast as 2 weeks
SBA Loan Application Process
Considering that SBA Loans are guaranteed by the Small Business Administration, it seems slightly easier to qualify for the loan. However, this may not be totally true as you are still dealing with banks.
Most traditional financial lending institutions still insist on reviewing your credit history, financial statement and possible collateral for you to qualify for an SBA loan.
A comprehensive business plan and a proof that you are capable of servicing the loan will be required of you to qualify.
However, with a five-step process, you are sure of getting SBA loan, stress-free thereby shunting the entire process traditional financial institutions will put you through. These processes include:
Step 1 Applying for prequalification: When you contact our loan officers, you will be expected to fill out our application form. The loan officer guides you through the entire process as he issues you an interest letter and may possibly visit the business site if necessary. Once the term of the loan has been agreed, the loan immediately goes into underwriting.
Step 2 Underwriting/Credit Approval: The information from the application process is carefully analyzed during the underwriting and is approved by the loan committee if the necessary requirements are met. The term of the approval is issued in a commitment letter.
Step 3 Packaging: Upon approval and the signing of the commitment letter, the loan is either packaged as an SBA 7(a) loan, SBA 504, or USDA B&I loan. A closing checklist will be provided to you, all third party reports ordered and title opened.
Step 4 Closing: The file is ready to be closed once the lender has gotten the approval from the SBA or USDA and has also received the third party reports. A closing date of your convenience will be chosen.
Step 5 Servicing: Once you have received the loan, it is important you begin to service it regularly as agreed in the contract terms.
SBA Loan Requirements
In order to qualify for SBA loan, certain documents will be required of you. They include:
- A valid Driver’s License
- Voided Business Check
- Bank Statements
- Business and Personal Tax Returns
- Business Debt Schedule