Documents Needed to Apply for a SBA Loan

Documents Needed to Apply for a SBA Loan The Small Business Administration (SBA) of the United States was founded in 1953 to provide financial assistance and consulting services to people starting a small business. The SBA also backs loans provided by other lenders and typically offers lower interest rates. The federal government encourages small-town banks and small businesses to work together with by offering a small business lending fund to the SBA. If you plan to apply for a SBA loan, you need to gather several types of documentation together ahead of time. While all loan programs have different requirements, you will most likely need the following documents at a minimum:

  • Personal and business bank statements for the past 12 months.
  • Personal and business credit reports from all three major reporting agencies. Although the lender will request these reports when you submit your loan application, you should request copies for yourself ahead of time to ensure that there are no errors or omissions on either report. This gives you time to correct the situation before submitting your application.
  • A copy of your business plan that includes a mission statement your projected profit and loss, your projected cash flow and a balance sheet.
  • A statement of the collateral you are pledging with the loan if that is required. You may be able to avoid placing one or more of your valuable items as collateral by presenting a strong business plan. Your collateral statement should describe the cost and value of all items you are offering as collateral in exchange for a business loan.
  • A resume that highlights your business or management experience. This is especially important if you are a new small business owner applying for your first loan.
  • A separate sheet describing your personal background. This should include your current and previous addresses, any other names you have used, criminal history if applicable and your educational background.
  • Personal and business tax returns for the past three years.
  • Financial statements from each person who has at least a 20 percent stake in your business.

You may also need to submit one or more of the following documents:

  • Business licenses and copies of registration forms proving that you have complied with local business laws.
  • Articles of incorporation
  • Commercial leases
  • Franchise agreements
  • Copies of third-party agreements

 

Be Prepared to Answer Lender Questions

After you have formally submitted your loan application to the SBA or a lender it is associated with, you can expect to meet with a banker face-to-face. The most important piece of information he or she wants to know is your reason for applying for the business loan. It might seem obvious to you after preparing your packet of paperwork, but you need to be prepared to answer the question in a thorough and intelligent manner. Describe the nature of your business, your immediate and long-term goals and how you intend to meet a need in the community that no one else is currently meeting.

The next thing you need to be prepared to discuss with a lender is how you intend to use the proceeds of the loan. Your initial start-up costs could include construction costs, an office lease, purchasing equipment, advertising and more. You can also describe how you will use the funds long-term, such as paying employee salaries before your business is profitable.

Once your lender has a good understanding of your business, its goals and your start-up costs, he or she may ask for more in-depth information about the business assets you intend to purchase. You should be ready to provide your lender with the name, address, telephone number and email address of each supplier as well as your credit line with each. He or she may also ask for a description of each piece of equipment you intend to buy and how you plan to use it in your business.

Before providing you with a loan, the SBA or another lender will want to know about your other business debt. It is his or her job to ensure that you are not taking on more debt than you can handle. You need to provide the lender with contact information for your other creditors as well as the amount of money that you owe. As part of the loan process, the lender will determine the debt-to-income ratio of your new business and approve or deny your request accordingly.

Lastly, the lender may ask you to provide additional details about each member of your management team. This includes the person's name, business and management experience, title with your company and his or her expected duties. The lender will only request financial data if the management team member has more than a 20 percent vested interest in the business. Be certain to speak positively about each person and demonstrate how he or she plays a critical role in the future success of your new company.

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