Small Business Loans With SBA

This Blog On Small Business Loans With SBA Was Written By Gustan Cho Of Gustan Cho Associates Commercial Lending Resource Center

Small Business Loans ‐ The U.S. Small Business Administration ( Commonly referred as SBA) is one of the most popular and leading sources for small business‐loans. The United States Small Business Administration, or SBA, is similar to what the Federal Housing Administration is to home buyers when applying for FHA residential mortgage loans. Similar to the FHA program for residential clients who are planning on buying their first home or those who have little down payment and less than perfect credit, the SBA, U.S. Small Business Administration, role is to provide low interest business loans to small business owners who may not qualify for traditional commercial loans. FHA encourages home ownership to hard working Americans who have stable income and have established themselves and can afford the monthly housing payment but may not have the 20% down payment for a Conventional home purchase but do have the 3.5% down payment to purchase a home and are able to afford the monthly housing payment. SBA function and role is to encourage entrepreneurship for hard working Americans who want to fulfill their American Dream of business ownership but do not have enough down payment and credit profile to qualify for a traditional commercial loan by a commercial bank.

Applying For Small Business Loans

Applying For Small Business Loans is streamlined so whether you go to one SBA commercial business lender or another SBA Lender, the forms that you need to complete is similar in nature so you do not have to complete totally different forms when applying for Small Business Loans. All documents that is required for Small Business Loans are similar also so if you do not qualify with one particular SBA Lender for Small Business Loans, you already have the whole application and document package so it will be easy for you just to submit your whole file to a different SBA Lender. Your commercial mortgage broker will help you package up these loan documents that are required for you and the chances are that you need to complete one generic Small Business Loans application and have one standard Personal Financial Statement. Each Small Business Loans program has its own specific forms that needs to be completed by the borrower, however, the majority of the documents and forms that are required are the same with every Small Business Loans mortgage lender. The hard part is to make sure that you have gathered all of the information ready for processing.

Some of the typical items required for business loans is:

  • Commercial Application – Similar to residential applications
  • Personal and Business Tax Returns for past three years.
  • Personal Financial Statement.
  • Profit And Loss Statement on your current business or if new business, a current and past profit and loss statement and pro-forma profit and loss statement.
  •  Resumes – This is needed for evidence of management’s business experience, technical training, certificates earned, licenses that are active, and educational background.
  •  Business Plan – All loan programs require a business plan for start‐up businesses. This plan should include projected financial statements, including profit and loss, cash flow and balance sheet.
  • Personal credit report – The lender will review credit heavier for individuals starting a business. Explain periods of bad credit, prior bankruptcies, prior foreclosures, judgments, and periods of bad credit.
  • Letters of recommendations by vendors, lending institutions, colleagues, and professionals in your industry.
  • Tax Returns ‐ If they are already in business, most commercial loan programs will also require previous year’s tax returns for the business and the person. This is usually true for anyone that owns at least 20% of the business.
  •  AR/AP ‐ Depending on the loan type, accounts receivable and accounts payable information may be required.

Collateral Requirement For SBA Loans

Collateral ‐ Collateral requirements vary greatly. Collateral is what the lender goes after when borrowers default on their commercial loan obligations. The more collateral the borrower has, the more skin in the game the borrower has and the less risk the commercial lender has. Loan To Value is the loan balance divided by the market value of the property. The lower LTV, Loan To Value, the safer the lender is because the amount of equity the borrower has. There are some commercial loan programs that do not require collateral. Commercial Loans that has a higher degree of risk for defaulting will require collateral by the commercial lender. Again, every case on commercial loans is a unique case and there are many factors a lender will assess risk on a borrower plus the deal at hand. There are many types of paperwork that is required for a borrower who is applying for a SBA Loan. Your commercial loan broker will help you prepare the necessary paperwork that the SBA Lender will require. Besides the standard docs, there are certain types of docs that is necessary for you to submit when it comes to SBA Loans.

Legal Documents Required ‐ Depending on a business loan’s specific requirements, your Commercial SBA Lender will most likely  require you to submit one or more legal documents in order to proceed with your request of a SBA Loan for your business. These documents will most likely include the following:

  •  Business licenses and registrations required for you to conduct business as well as a business plan. A short summary on the history of your business, your experience, your goals, and why they should give you the funding and how you are planning on making a success of your business. Business Lenders love a good story backed by facts; Exhibits, proven track record, experience, growth statistics, and proposed realistic goals.
  • Articles of Incorporation of your business.
  • Copies of contracts you have with any third parties, vendors, business affiliates.
  • Franchise agreements, partnership agreements, LLC agreements,  if applicable.
  • Commercial leases and other liabilities that your business has as well as assets and accounts receivables.
  • SBA borrowers need to keep the fact that there are many commercial loan options, there may be more documents that may be need to be provided by your SBA Lender and forms that needs to be completed, and information required. You will receive the necessary proper documents that need to be provided by your SBA commercial loan officer and other forms that may need to be completed depending on your Small Business Loan Program. Your SBA loan officer will provide you with proper instructions on your submission requirements and specific instructions for each deal. Your loan officer can do the work with his or her commercial loan processor or may just direct you to the Small Business Lender directly where the direct SBA Lender may do all of the work.

If you are interested in knowing more about SBA Loans or if you need to know whether a specific business loan qualifies for a SBA Loan, please contact The Gustan Cho Team at Gustan Cho Associates Commercial Lending Information Resource Center at gcho@gustancho.com or call Gustan Cho at 262-716-8151. Text for faster response.

The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.

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