SBA Loans: 5 Important Criteria

Posted by allanmadams on September 26th, 2011 at 03:03pm

From time to time small business owners and entrepreneurs may need to inject more capital into their business. A viable option for businesses intent on remaining competitive and strong is the SBA (Small Business Administration) loan.

You must first prove that you have applied to and been turned down by a conventional bank before applying for a SBA loan. SBA provides many varied programs for business loans. What are the criteria’s for business owners’ intent on applying for SBA loans? When meeting with the lender it is recommended that business owners bring along the following information and necessary documentation to their meeting:

1)      A sound business plan: The main factor for qualifying for a SBA loan is the business’ ability to repay it. An understanding of their business, whether or not there has been proper research put into its operations and whether there is a clear understanding of how the business can generate income need to be clearly indicated. The business owner needs to prove that it can generate income long enough to repay the loan during its term. Include important details such as the business description, legalities, annual sales and forecast, employee count, financial statements and the internal management structure. A stake in the business should be held by the loan applicant / business owner.

2)      Personal credit rating: Ensure that your personal credit rating history is up-to-date. Honoring and repaying your loans in a timely manner goes a long way in proving your loan-worthiness. Your ability to get the loan approved in a timely and efficient manner can be dampened by a poor credit history.

3)      Loan details:  Be clear and concise about the loan you are applying for. Describe in detail how the funds will be used. Include the purpose you are applying for the loan, how much you require and the type of loan that you are applying for.

4)      collateral: Loan applicants are required to present collateral for the loan application. Collateral can be presented in the form of personal property, equity in the business or personal cash. In the event that the business cannot generate the necessary income to repay the loan, loan applicants need to prove that they can repay the loan.

5)      The Management Structure: Proper management of the funds as well as successful running of the business by a fully capable member of the management team needs to be proven by the loan applicant. The lender must be convinced that you know what you are doing.  Repaying the loan in a timely and proper manner must be proven with confidence.

What is SBA loan? How does it work? What are its benefits? Here is the answer to all your queries about SBA loan. Know more about SBA Loans (Small Business Administrator). Click here

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