August 28, 2024
Adam Hoeksema
Are you unsure where to start with your SBA loan application? At ProjectionHub, we've created a FREE SBA Loan Application Checklist to help you confidently approach the application process. This tool covers everything you need to know about the different types of SBA loans, where to apply, the necessary documents, and tips to boost your approval chances.
We've assisted over 50,000 small businesses and startups with their projections and business plans and the vast majority were for loan applications. With my experience as a former SBA loan officer for almost seven years and our founder Adam's decade-long role as an SBA lender executive director at Bankable, we hope to make the process easier for you with our expertise.
In this article, we’ll provide an overview of our SBA Loan Application Readiness Checklist, highlighting key sections and how it can simplify your application process.
Choosing the Right Type of SBA Loan
The SBA (Small Business Administration) offers several loan programs tailored for different business needs. Here’s a quick overview:
1. Microloans Ideal for small businesses and startups needing up to $50,000. These loans are perfect for working capital, inventory, and equipment.
During my time at Bankable, we approved over 1,000 SBA microloans to a variety of small businesses. It really is a great program!
2. 7(a) Loans The most common SBA loan, offering up to $5 million for various purposes like working capital, equipment purchases, debt refinancing, and real estate. To help you find the ideal lender for your specific situation, we've developed a free tool—check out our SBA Lender Finder.
3. 504 Loans Designed for purchasing major fixed assets such as land, buildings, or heavy equipment, providing up to $5.5 million with long-term, fixed-rate financing.
Understanding Your Needs If you're a startup or have smaller funding requirements, microloans might be the best fit. For more substantial needs, like real estate or large equipment, 504 Loans are more suitable. The 7(a) Loan Program offers the most flexibility for various needs.
Finding an SBA Lender and Tips for Working with Loan Brokers
Start by comparing multiple lenders to identify one that fits your specific needs, especially those with experience in your industry. While brokers can connect you with lenders, be aware that they may have biases due to finder’s fees, so ensure they have your best interests in mind. Additionally, some lenders specialize in startups while others focus on established businesses, making it important to choose one aligned with your business stage.
To simplify your search, use our free SBA Lender Finder, find the right lender for your business in minutes!
Understanding the Typical SBA Loan Process
The SBA loan process can vary depending on the lender and the type of loan, but here’s a general overview of what to expect:
1. Standardized Process with Banks Many banks participate in SBA loans, and their processes tend to be more standardized. They generally follow the bank’s usual loan procedures with additional requirements to meet SBA criteria. This can make the process relatively rigid. Expect some paperwork, but I think it is worth it!
2. Community and Micro Lenders For smaller loans, such as those under $50,000 or $75,000, you might work with SBA microlenders or community advantage lenders, many of which are nonprofits. These lenders can have very different processes, and sometimes the loan might not even be an SBA loan but something similar. Their processes are often more flexible and vary from lender to lender.
3. Key Steps in the Process Despite the variations, some steps are common across most SBA loan applications:
- Lender Intake Application: Each lender will have their own application form.
- Conversation with a Loan Officer: You’ll discuss your business details and funding needs.
- Documentation Submission: Submit required documents, such as financial statements and tax returns.
- Underwriting: The lender will review your application and documents.
- Committee Review: A loan committee will make the final decision.
- Additional SBA Forms: Depending on the loan type, there may be extra SBA forms to complete.
- Closing: Once approved, you’ll finalize the loan agreement and receive the funds.
Prefer visual learning? Watch the video version of this article here:
Key Documents Required for SBA Loan Applications
You can't prepare for everything your lender is going to ask you for, but you can prepare for a big chunk of the core documents they want to see. These documents form the foundation of your loan application and are essential for moving through the approval process smoothly.
1. Documents for Startups If you’re a startup, you'll need:
- Personal financial statement
- Personal tax returns
- Business plan (we can help with this)
- Financial projections (we can help with this)
2. Documents for Existing Businesses For existing businesses, the requirements typically include:
- Personal and business tax returns
- Business financial statements
- Financial projections if the business is expanding
- Credit release form
- Identification documents
- Personal financial statement
3. Documents for Business Acquisitions In the case of an acquisition, you’ll need:
- Personal and business financial statements
- Tax returns
- Financial projections
- Business plan (if applicable)
- Credit release form
- Identification documents
4. Additional Documents Depending on your specific loan request, business type, and loan structure, additional documents may be required. It's important to prepare for a wide range of requests, but focus on gathering the core documents listed above.
For a more detailed list of documents, refer to our SBA Loan Application Readiness Checklist
We hope this resource overview makes you feel more comfortable and confident as you prepare your loan application. If you have any questions for us, don’t hesitate to reach out at support@projectionhub.com. We’re here to help you through every step of your SBA loan journey!
