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7 tips for landing an SBA loan

Small Business Administration (SBA) loans are a worthwhile financing option for small to mid-sized companies. These government-backed loans typically offer longer terms, more competitive interest rates and new maximum loan sizes of up to approximately $10 million. In contrast, conventional business loans typically have shorter maturity dates and may require larger down payments. SBA loans may be able to offer lower monthly payments, which improve cash flow and require less cash down up front, so more cash stays in your business.

Your primary SBA loan options include both SBA 504 and SBA 7(a) loans. How the loan funds will be used as well as the size of the loan really determine which SBA loan is the best fit for your business. Here at California Bank & Trust, one of the nation’s most active and experienced SBA lenders, we recommend the following tips for helping to get your SBA loan approved.

*Provide details on exactly how much financing you need and how you will use it

Banks appreciate specifics, so start by stating a precise dollar amount and give details of how you will use the funds. For example, if you are seeking $125,000 to expand your business, explain to your lender how you will use the funds (i.e., $75,000 to support three months of expenses and another $50,000 for seven computers and a server).

*Provide information about company management

When banks lend money, they like to understand who owns and runs the company. This is a key factor in presenting your loan for approval. Help your lender by providing a résumé for each owner or key employee and describe their functions and responsibilities.

*Be prepared to offer collateral

The SBA requires collateral to fully secure your loan to the extent that it is available. If you are purchasing an owner-user commercial property, it will be used as collateral. If you are using the loan to finance other types of business needs and you own a home, you will likely be asked to pledge it. The SBA may also request a lien on your business assets and may require life insurance on sole owners of a business.

*Detail your credit history and credit score

Your credit score is an integral part of the loan process because it illustrates the ways in which you handle your other obligations. Your bank will eventually run its own credit report, but if you can provide information prior to them doing so, you can discuss any issues ahead of time. If you don’t know your credit score, take the time to research it on the Internet.

*Provide complete copies of tax returns, financial statements and bank statements

While it can be time consuming to gather these documents, your bank will want to know everything about you and your business if it is to become, in essence, your financial partner. One way to streamline the process is to provide a complete package of your financial documents either in a hard or soft copy format. A complete package at the start of the process helps expedite building the loan package.

*Explain how you’ll achieve your projections

Now is the time to sell your lender on your vision and forecasted success. If customers have expressed a desire to do business with you, give your lender a copy of their correspondence. Prove to the lender that a market for your product or service exists, and demonstrate the validity of your sales and expenses.

*Expect questions and be patient

Your lender needs to connect with your business and your story, and will appreciate your assistance. Take the time to thoroughly explain the nature of your business, your vision and your background. Your banker will likely be presenting your loan request to others in their organization, so he or she will need your help in making a case for getting your loan approved. The process may take some time, so it helps to be patient.

For more information on SBA loans, call 1-800-CALIFORNIA (800-225-4367) to speak with a banker at one of our San Diego California Bank & Trust branch offices or visit calbanktrust.com, member FDIC.

-Submitted by California Bank & Trust.

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