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Updated: Jun 29, 2020
Small Business Administration (SBA) loans’ low rates and extended repayment terms can make them an appealing source of funding for small businesses. However, getting an SBA loan isn’t necessarily a quick and easy process.
When applying for an SBA loan, you’ll be working with an SBA-approved lender rather than the SBA itself. The lender is the one that will review your loan package and lend you the money. Depending on whether the lender has preferred status with the SBA (you can check an SBA Preferred Lender list or notice if the lender’s website includes this label), it may pass your loan package on to the SBA for final approval.
While the minimum requirements and loan rates and terms may be similar no matter which SBA-lender you work with, the application, process, and assistance you receive can vary.
Gathering the required documents and preparing your application will primarily fall on you, the business owner. But SBA lenders can offer value-added services in many ways, from the guidance they provide to how they work with you to ensure you can complete everything promptly.
An SBA loan could be the best option for funding, depending on how you plan to use it. But even then, there are many different types of SBA loans available, including multiple versions of the popular SBA 7(a) loan. There are also situations when an SBA loan might not be the best option, such as if you quickly need funding or when you don’t meet the minimum requirements.
It will be your decision in the end. You will want to work with an SBA lender that will be extremely honest with you and explain the pros and cons of different types of financing as they relate specifically to your business and situation.
Similarly, it would be best if you had a plan before starting the SBA loan process. It would help if you also made decisions about using the funds based on your business advisors, research, and experience. However, loan officers may be able to offer some perspective and share how similar businesses have best put the money to work.
There are certain forms you should start collecting right away if you’re looking for an SBA loan. Doing so can reduce the timeline of the SBA loan process. These include:
Depending on your lender, the SBA loan application process may also require you to prepare a business plan, resume, and financial projections.
While you’ll have to collect many of these forms on your own, you can look for assistance from your accountant, attorney, and financial advisor. You could also reach out to your local SCORE chapter, a nonprofit and SBA partner, to find a mentor or workshop on SBA loans.
SBA lenders may also offer tools that can help you create, understand, and format some of the information. Additionally, your loan officer or account manager may be able to point out when something needs to be expanded or adjusted. You can easily alter materials such as your business plan or resume, for example, to increase your chances of approval.
Many types of lenders offer small business financing and SBA loans. These include national banks, community banks, credit unions, nonprofits, and online lenders. When it comes to applying for an SBA loan, finding the right fit can be crucial.
Lenders tend to specialize in businesses within specific industries. They may only offer certain types of SBA loans and could have stricter requirements than the SBA’s minimums.
For example, Funding Circle helps businesses secure SBA 7(a) loans with loan amounts of $20,000 to $5 million and terms of up to 10 years. We also focus on companies that have been in business for at least three years, have a positive book value (more assets than liabilities), and $500,000 or more in annual revenue.
If you’re looking for an SBA loan to start a new business or to borrow money to purchase commercial real estate with a 25-year term, other lenders will be a better fit. But by narrowing its focus, building off an established online lending platform, and assigning dedicated account managers to applicants, Funding Circle can streamline the application process for the businesses it serves.