June 27, 2023 By Kristin Woodward

If you're a small business owner, chances are at some point in your business journey, you've considered borrowing to help cover working capital needs, purchase equipment or inventory, or make other capital investments. SBA loans offer low rates, long repayment terms and flexible uses of funding, making them a preferred funding source for many entrepreneurs.

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But the application process may be intimidating, and being adequately prepared is often essential to successfully qualifying for an SBA loan. Doing your research and getting the proper paperwork in order before you start the application process may help set you up for success. 

Understand the different types of SBA loans available

Before applying for an SBA loan, make sure that you understand all of the available loan programs and which one would best fit with your business needs and goals. A 7(a) loan is one common option available; others include microloans for businesses needing less than $50k as well as financing options like CDC/504 loans that provide financing for commercial real estate, equipment or fixed assets. Understanding all these loan types may help you find one that aligns with both. Learn more about how to determine the right type of business loan for your company.

SmartBiz Loans® does not offer SBA microloans or 504 loans, but banks in the SmartBiz® network fund SBA 7(a) loans, Bank Term Loans, and more financing options.

Check the requirements

Different types of loans have different requirements. For example, for an SBA7(A) loan, you’ll generally need to meet these common eligibility requirements (in addition to others) for a loan from banks in the SmartBiz® network.

$30,000 to $350,000 SBA 7(a) Working Capital or Debt Refinance

  • Time in business must be above two years
  • The business owner's personal credit score must be above 650
  • Business must be U.S. based and owned by a U.S. citizen or lawful permanent resident who is at least 21-years old
  • No outstanding tax liens
  • No bankruptcies or foreclosures in the past 3 years
  • No recent charge-offs or settlements
  • Up-to-date on government-related loans

You can check for all the current requirements for the type of loan you’re seeking on the SBA’s website.

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Work on your credit score

Your credit score is typically a significant factor in determining whether you will get approved for an SBA loan. Banks will look at both your business and personal credit scores during the application process, so make sure they are in good standing by paying your bills on time and reducing your debt-to-credit ratio. These tips may help.

SBA loans often have lower credit score requirements than traditional bank loans, but it's still essential to have a good credit history. Review your credit reports for any errors and take steps to rectify them. If your credit scores need improvement, consider focusing on building a positive credit history before applying for an SBA loan.

Collect all necessary financial documents

The SBA loan application typically requires a lot of financial documentation, so make sure you have all the necessary information on hand. This includes 

  • Tax returns
  • Financial statements
  • Bank statements
  • Business licenses
  • Any other documents that prove the financial standing of your business

Having all these documents ready may speed up the application process significantly. Organize your financial records in a clear and accessible manner to help facilitate the loan application process and demonstrate the financial stability of your business.

Create a detailed business plan

The SBA typically requires business owners to submit a business plan as part of the loan application. If you don’t have one already, you’ll need to create one before you apply. 

Your business plan should be detailed and well-organized, highlighting why your business is a good investment. Start by providing a comprehensive description of your business, including its mission, vision, and unique selling proposition. Conduct thorough market research to identify your target audience, competitors, and industry trends.

Develop financial projections, including sales forecasts, cash flow projections, and profit and loss statements. Highlight your management team's qualifications and outline your marketing and operational strategies. Including these elements in your business plan will help demonstrate to lenders that you have a solid understanding of your business and its potential for success.

For more help, see our guide for how to start your business plan.

Get professional assistance

To increase your chances of qualifying for an SBA loan, it may be worthwhile to seek professional assistance from a professional small business consultant. They may help guide you through the process, assisting in the preparation and review of your loan application and business plan; ensuring all your financial documents are organized appropriately; and providing insights and recommendations based on their experience with SBA loan applications. If you go this route, be sure to look for reputable consultants or organizations that specialize in assisting small businesses with SBA loans.

The dedicated team at SmartBiz® is here to help you through the entire loan application process.

Get prepared and get going

Preparing for an SBA loan application generally takes a lot of planning and organization. However, following the above tips may help make the process smoother, improve your chances of success, and help you start your business’s next chapter. 

Check out our Learning Center for more helpful tips on getting ready. And when you are ready, you can see our current rates and find out if you pre-qualify in just five minutes without impacting your credit score.*

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