Nowadays, most small businesses find it a lot easier to obtain extra credit and all thanks goes to the current economy. The report from Small Business Trends shows that about 25% of most small businesses now receive loan approvals easily from major banks. This also represents about 0.1 percent increase all over, compared to previous years.
Although this proves there’s an improvement, it also means that almost about 75% of other small businesses do not receive approvals for bank loans. Some businesses (small scale or new ones) say that when they apply for loans, they receive rejections. At such times, the only option they turn to is Small Administration Loans or SBA loans to help secure credit for their business expenses. Note that for over sixty years, the SBA helps all new businesses to obtain the amount of loan that they need.
When you approach the SBA itself, you will learn that they do not actually lend the money directly to all small businesses, but rather they “set the guidelines for loan approvals, made by partnering organizations, lenders, and other micro-lending institutions.” This is more like a guarantee for the bank that you will take the loan and repay it. This in return gets you your loan at a better price.
Securing an SBA loan is not an easy job, especially because it requires you to fill out many forms or you can say government files and receive a check. Usually, this process is a stringent one, and you have to prepare yourself, organize your details, and put a clear plan for business success.
Before you begin with the loan application process, here are some of the concepts that you need to consider.
Do You Actually Need the Loan?
At first glance, this may seem like a simple question. However, many businesses do not plan on what they will do with the new capital they receive and only talk about financing and growth vaguely. It is crucial that you know exactly what kind of loan you need and whether it is even a suitable option to choose the SBA. If you choose Aurumfi for SBA loans, you should know there are often three kinds of different SBA loans, and each one of these is suitable for different businesses and situations.
Amongst the other two, the most common one is the 7(a) SBA loan program, which provides businesses with about $5 million for financing and growth purposes. The other subsets of this loan give benefits for veterans and serve others areas that you can take advantage of, in terms of business operation.
Another option is the 504/CDC SBA loan, which is one that helps all businesses to make a fixed purchase of assets like equipment for their business. The last one is the microloan program, which helps small businesses to receive a small amount of money, just as they need for their business.
Even if you prefer other loan options, know that you have to persuade banks and lenders about why you need the capital and how it will benefit you.
The Application Preparation Process
Keep in mind that when the time to apply for the loan with a bank comes, you must document the financial history of your business, your credit history, future strategy, and other documents. This is especially true when you prepare to apply for the SBA loan. You have to show that the plan of your business will work and that you are experienced to ensure the plan is a success. You have to show some collateral, which will guarantee the lenders that you are eligible to repay the loan.
What are the documents that matter the most? Tax returns, bank statements for the past three years of your business operation and your financial (personal) history as well as your credit score help to give lenders a clear idea of whether the SBA loan program is ideal for your financial background or not.
You should also consider working with some development centers or work with an accountant who can help you gather and organize all the necessary information.
Show Them Who You Are
Know that receiving loan approvals does not only mean you have to focus on the financial figures, you also have to show lenders and banks that they can rely on you. Show them that you are organized, friendly, and a competent individual who knows every detail of your industry and business. You have to show them that you are willing to cooperate and make things a lot easier for the lender.
Organize your information in the best way that shows you can repay the loan, and let your business grow in the long term. You should also prepare yourself to answer any questions. Even if you do not plan to apply for the SBA loan right away, it is advisable that you cultivate a good relationship with the lenders and banks who know your industry.
An SBA loan is the right choice for most desperate new businesses who are struggling to secure their capital. If you feel you need more credit for your business, it is best that you consider this option and give your business a boost!
