Smaller businesses have easier to obtain credit than previously thanks to the current economy. According to Small Business Trends 25.2% of small businesses in December 2017 were allowed to obtain loans from major banks. This represents an increase of 0.1% over November and an increase of 1.3 from 2016.
While this may be an improvement, it means that almost 75% of small businesses are not allowed to obtain loans from large banks. While there are other institutions to which 75 percent can address, businesses that have been rejected for loans should turn to the Small Business Administration (SBA) to get the business. 39, help to obtain credit. For over 60 years, the SBA has helped new businesses get the loans they need.
The SBA itself states that it does not lend money directly to small businesses, but rather "establish guidelines for loans from its partner lenders, community development organizations and microcredit institutions" . ready, and you get your loan at a fair price.
However, getting an SBA loan is not as simple as filling out a government form and getting a check. The process is rigorous and you will need to be prepared, organized and have a clear plan for success. Here are some concepts to consider before starting the loan application process.
Why do you need the loan?
This may be a simple question, but far too many companies do not plan what they would do with new capital beyond vaguely talking about "growth" or "financing." Know what kind of loan is particularly important the SBA. There are three different types of SBA loans, and each is suitable for different situations and businesses.
The most common is the 7 (a) loan program, which provides up to $ 5 million in capital for growth or financing purposes. There are different subsets of this program, such as loans for veterans or businesses serving disadvantaged areas that you could benefit from.
Then there is a CDC / 504 loan, which helps companies make purchases of fixed assets such as equipment or an office. Finally, the SBA offers microcredit programs that can help extremely small or new businesses get the little capital they need.
Even if you decide not to work with the SBA after all, knowing what you intend to do with a loan is essential in order to persuade banks to give you capital.
Preparation of an application
When you apply for a loan from a bank, you must document the financial history of your business, your future strategy, your credit history and many other documents. This remains true when you apply for an SBA loan. You want to show that your business plan can work, that you have the necessary credibility to carry out the plan and that you have guarantees that you guarantee that you can repay the loan.
Which documents are the most important? SCORE has an excellent list detailing what you need when you talk to lenders. Bank statements, tax returns for the last three years if your business has been in operation for a long time, and your personal financial history, including your credit score give lenders and the SBA an idea of your financial situation .
Consider working with small business development centers or finding an accountant to help you organize and gather the necessary information, but just do it.
Do you sell
You need the SBA and lenders not only to approve your financial numbers, but from you. You must be a friendly, organized and competent person who knows the details of your business and your industry and who is willing to cooperate to make things easier for the lender.
Do not just leave the numbers, but organize a presentation that shows how you can repay the loan and grow your business in the long run. Dress professionally, even if your business is radically innovative and ready to respond quickly to questions.
Even if you are not interested in applying for an SBA loan right now, start cultivating a relationship with bankers who know your industry. A good banker is just as crucial to the survival of your business as a good accountant and a good lawyer. And while you can not hire a banker for your business as you can with other professions, you can cultivate good relationships that will be profitable in the long run.
An SBA loan is not a lifeline launched against desperate companies that are trying to avoid bankruptcy for a month. This is a chance for businesses granted by the government to show the bankers that they possess the skills and commercial know-how to turn their capital into something awesome. It requires organization, knowing the past, present, and future of your business and industry, and showing that you are a competent and friendly person who deserves a little extra help.