How to Apply for a Small Business Loan

Learning how to apply for a small business loan is something that many entrepreneurs wish they knew. The ability to come up with financing for their business needs is critical. Applying for a small business loan can help get the money you need to get started, and it's easier than you might think.

Small Business Administration

The Small Business Administration is a government agency that was designed to help promote small business growth in the country. The government realized a long time ago that small business is what drives the American economy. Therefore, it is in their best interest to help them get started and stay in business. The Small Business Administration offers many programs designed to help. 

With an SBA loan, you will still be going through another lender. Therefore, in order to find an SBA loan, just go to one of your local banks. Many times, banks will advertise that they are a preferred SBA lender. This means that they are familiar with the SBA programs and they have granted many other loans under that umbrella.

With an SBA loan, you are getting a government insured loan. The bank and the SBA split the risk associated with giving you a loan. This makes the bank more likely to take you on as a borrower because someone else is taking part of the risk if you default. However, they will not throw all caution to the wind and invest in everyone that walks through the door. You will still have to fit certain lending criteria to qualify for an SBA loan.

Application Process

Once you find a lender that you would like to work with they will give you an application to fill out. The application will require various information about you and your potential business. If you have any business partners, they will need to include their information on the application as well. The lender will then review the information and in some cases request that you explain the business to them in more detail. 

During the review process they will most likely take a look at your personal credit score and the personal scores of your partner. They will review the business model and make sure that it seems viable to them. They will scrutinize every aspect of the business model, so be prepared to be thorough with your presentation. 

Once they overlook everything, they will let you know whether you have been approved. They will most likely require you to come up with a down payment on the loan. The SBA and the bank like to see that you have something riding on this business along with them.