Ask a small business owner what their biggest frustration is in dealing with the applying for an SBA Loan and they will tell you all the paperwork that is required. As an owner, the question is why an SBA bank needs all this information? The simple answer is that SBA loan officers look at thousands of applications for business loans. They understand a little about a lot of different business types, but they are not experts at any give business concern. They need to be educated not only on your business categories but also on your business model. When reviewing an application, the loan officer will look for 4 thing in order to determine if this business justifies the risk associated with lending money. If a small business owner understands up front what the bank is looking for it will increase the chances of a successful loan closing. Depending on the loan officers experience they may want to see how well the owner understands the basics of running business. If a owner understand the fundamentals of business the SBA loan will have a greater chance of funding. I have put together 4 things that a small business owner should understand backwards and forwards before seeking a SBA Loan.
Management
One of the most important determining factors of the success of any business is the management team that will be making the day in and day out decisions. Even if the business is a one person operation this is still very important to the commercial loan officer.
Performance
What is the performance of the business and a list of ways that the business has improved from the decision that the management team has made in the past.
Product and service
A brief description of the product or service and what direction the business is heading. One great thing to put into this section is any new things that the business will want to target . This also give the bank a chance to do some research into your market for a better understanding of your business.
Prospects for success
The last thing is what are your chances of success in the future. This is where you may want to put a brief over view of the trend and where you got your research. It is important to include this information so that person looking the viability of the business can do some research on their own.
This is just a brief overview of where to start the SBA Loan process. A small business owner should look at all the options available like the Microloan and the 504 loan. Sometimes just having a starting point will help put things into motion an develop the momentum to work through the process. Even if you do not need SBA loans for your business it is not a bad thing to go through this exercise to have a better view of your small business.
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Good article and exactly right. Small businesses can turn to business cash advances if they can’t secure a bank loan or if they need to get cash fast and without some of the extra paperwork involved in traditional loans.
On official site of SBA Loans I found this:
The United States Small Business Administration was established on July 30, 1953 when Congress passed the Small Business Act. The stated purpose of the SBA is to help small businesses remain viable in the United States. The SBA helps small businesses increase their borrowing power by directly granting loans and also guaranteeing loans that banks and other lenders make to small businesses.
It’s very good that there is such servive.
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Great post. Although we haven’t adopted the Microloan program yet, we facilitate SBA 504 and SBA 7(a). O/O properties are our niche. Businesses with a good track record have a greater chance of obtaining any SBA loan.
Thanks for the info. Small business need the 7(a) and 504 loans funded.
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