Are you a startup looking to expand your business? Do you need some sort of loan to help your financial stability in running your business?
Well, SBA loans are the answer to your struggling business’s problems. SBA is also known as small business administration loans act as a boosting pill for small businesses. A small business having fewer than 500 employees is eligible to receive an SBA loan. Startups with lower annual income strive to get more loans to invest more in their businesses.
Here is what you need to know about small business administration loans.
Who is eligible to get an SBA loan?
As a startup, you are eligible to get a small business administration loan if-
- Your net income is below $5 million.
- You have less than 500 employees working for your business.
- The tangible net income of your business is less than $15 million.
- You need to have a minimum credit score of 640.
Startups opt for SBA loans to ensure growth and have a firm grip over their finances. There are different types of SBA loans that you can choose from. Let’s have a look at these different types of SBA loans.
Types of SBA loans:
SBA loans have different types to accommodate the needs of different small business owners. Here are a few types of small business administration loans that you can pick from-
- Standard 7(a) loan
- 7(a) small loans for startups
- SBA Express loan
- Export express loan
- Export working capital loan
- International trade loan
- Preferred lenders loan
- Veterans advantage loan
- CAP-lines loan
How can SBA help you with your small business?
When start-ups are looking to inject more investment into their business, SBA comes into the picture. As start-ups, you usually do not have enough funding for your business and any sort of external help can instantly boost your performance and help you get off the ground.
As SBA loans are administered by the small business administration of the United States, this ensures the regulatory authorities follow it and all the proceedings are under administration.
SBA Loans for startups can help startups with sales and marketing. Once your product/services are ready to advertise, you may need some extra funding to advertise them. This is where startups look for SBA loans.
SBA loans also help startups with risk management. Keeping a backup amount with you to cope with unforeseen circumstances, it is best to have a small business loan for your blooming business. Contingency planning is vital for a business, and to make sure you’re pre-equipped for dealing with any risky market situations SBA loans can help you stay firm.
Human resource management is an important part of flourishing businesses. To cope with the cost of adding up resources to your business SBA loan can be helpful to you.
How do you get your SBA loan approved?
Once you have decided to opt for a small business administration loan, the next step is to get it approved. Here’s how an SBA loan gets matured step by step-
- The first step is for a small business owner to design a business plan, a business plan once designed tells you about your financial needs.
- Arrange a meeting with the lender.
- Fill up the loan application, and allow your lender to complete it.
- Reviewing the loan application and performing a credit analysis.
- Approval of loan from the lender.
- Sometimes an SBA loan guarantee is required to make sure the loan is paid timely.
- Interest security for the lender.
- Once loan funding is made, the lending proceedings are completed and the post lending proceedings are taken care of.
Things to keep in mind when you are going for an SBA loan:
Small business administration loans are great for startups but here are a few things you should be mindful of when you are getting an SBA loan.
- Be clear about your purpose: Getting an SBA loan can be a lot easier if you mention your goal clearly on the application. Having an updated business plan before getting an SBA loan can help serve this purpose.
- Know the eligibility criteria before you apply for the loan: Some small businesses fail to get the SBA loan they apply for, due to insufficient information on the eligibility criteria. If you know the requirements pre-hand, you can decide on the right type of SBA loan and save yourself from wasting any time.
- Be prepared with your documents: When you’re applying for a loan, you will be needing a lot of extra documentation for your business which you might not have required before as a startup. These documents may include tax return documentation, business debt details, and statements from the guarantor.
- Select a partner that suits you best: Many startups fail with an SBA loan attempt because they opt for the wrong partner for their business. Know your lender before you go ahead with a loan scheme with them. The right lender will not only help you financially but can also help you grow in the industry.
Small business administration loans are designed to benefit start-ups. If you’re in the initial phase of your business with a clear objective and goal to achieve, you can look into a good SBA loan plan and go ahead with it.
SBA loans usually do not affect your credit score so this shouldn’t be a matter of concern for you while opting for one. To make the best of your SBA loan, you should have a clear business plan and prepare well before applying for an SBA loan.
Startups have been enjoying the numerous benefits of SBA loans with their growing scope in the industry.
Many startups even opt for SBA loans to keep a safe backup for the rainy days. Good strategic business plans come with multiple plans and secured financial stability. SBA loans have been great for both small business owners and lenders and create a flourishing business relationship between partners.