SBA Loans: Qualifying and Applying

In this first segment of this two-part article we willFor some industries, the SBA lender may look at your
discuss some of the general requirements andcompany's average revenue. For example, if you run a
application procedures involved in acquiring an SBAwholesale or retail business, your average annual sales
loan.for the past three years cannot exceed $6 million to
According to federal government research, small$29 million, depending on the type of business you
businesses provide about 75% of the net new jobsown. Construction companies need to fall into the
added to America's economy. They also employ fully$12 million to $28.5 million range. Basically, if you make
one-half of America's private sector workforce. 99.7%too much, you're considered too 'big' to need an SBA
of all employers in the U.S. are small business owners.loan. It's also very important that you're running an
These statistics make a strong case for the existenceindependently owned for-profit organization if you are
of a federal organization dedicated to the promotionconsidering SBA loans.
and proliferation of small businesses in this country.If you still qualify keep reading.
In 1953 the United States government established theWhen beginning the SBA loan application process, your
Small Business Administration (SBA) as a way oflender will require you to have some specific
assisting entrepreneurs in forming successful smallinformation ready. The first document you'll need is
businesses through government guaranteed loans.your business profile; this simply describes the type of
While the SBA does make many small-business loansbusiness you run, your annual sales revenue, the
itself, its primary function is to guarantee thenumber of people you currently employ, and how long
small-business loans made by private lenders.you've been in business. You will also need to provide
Most SBA loans are secured through any one of thea loan request. This is a description of how money you
SBA's many licensed partners nationwide. Besidesneed and how you plan to spend it. As with any loan,
establishing lending guidelines for their partners, theyou will need to provide collateral. Be prepared to
SBA also ensures reasonable loan terms byexplain how you plan to secure theloan.
guaranteeing major portions of the loan in the event ofThe most important information you will need to
a borrower default. Because of the decreasedprovide is the business's financial statements for the
liabilityprovided by the SBA, the lender is able to offerpast three years. These include: balance statement,
better interest rates and options to businesses in theincome statement, and the statement of cash flows.
early stages of development.As the owner of the business, youwill need to provide
Before we get too excited about the potential benefitsnot only your personal financial statements, but also
of SBA loans, it may be a good idea to first talk aboutthe financial statements of any other individuals that
who can potentially qualify. The size of your companyhold 20% or more equity in the company. Most lenders
obviously plays a large role in securing an SBA loan;will also ask for personal tax returns for the lastthree
after all,this is about 'small business'.years.
If you run a manufacturing company, its possible toIn the next portion of this article, 'SBA Loans: Options,
have up to 1,500 employees working for you and stillBenefits, and Lenders', we will further examine what
qualify for an SBA loan. On the other hand, dependingkinds of loan options are available, and for what kinds
on the type of manufacturing you do, it may be moreof businesses they are most advantageous. Lastly, we
likely that you'll be limited to 500 employees in order towill discuss different types of SBA lenders.
qualify for loan consideration.