Checklist for SBA 7a Loans

Do you need low cost funds to strengthen your small business? If you’re considering the gold standard, an SBA loan, this article is for you.

SBA loans are known as the best bet to grow and save money because of low rates, long terms and very low monthly payments. However, the word on the street is that the application process is difficult. That’s not necessarily true anymore. With a little planning and organization, you can get a low-cost SBA loan funded faster and easier than ever before.

Here’s a comprehensive check list you can follow to help expedite the SBA 7(a) loan process.

Determine if You’re Qualified BEFORE Applying

Before you invest time and energy applying for an SBA loan, you can easily take a look at your overall financial profile with the SmartBiz Advisor™ tool, the new educational tool from SmartBiz Loans®. You’ll learn about the 7 key criteria SBA banks consider when reviewing your application and how you can improve your loan readiness, if needed. It’s fast and free! Sign up today and you can also access your Loan Ready Score™*.

Choose an SBA 7(a) Facilitator or Lender

Who you work with can make a big difference in your SBA loan experience. Here are a few guidelines when considering lenders.

  • Look for lenders who embrace technology. Uploading documents to a secure platform is much easier than faxing, mailing or hand delivering.
  • Work with an SBA loan facilitator who is completely transparent and clearly identifies the rate, term, all fees and conditions of an SBA 7(a) loan.
    • Look for a company that is knowledgeable and experienced in the industry. For example, SmartBiz Loans recently passed JP Morgan Chase as the number one provider for SBA 7(a) loans under $350,000. We’re experienced in helping small businesses successfully apply for SBA loans through our bank partners.
  • Make sure stellar customer service is available by reading reviews by real customers online. Customer reviews on independent review site TrustPilot rate SmartBiz Loans 9.4 out of 10. Check out details about our experienced Relationship Managers here.

Qualifications for Working Capital and Commercial Real Estate SBA 7(a) Loans

Review these qualifications to make sure you fit the initial criteria. Note that each lender may have slightly different requirements.

  • Demonstrate a need for funds
  • Meet the SBA’s size standards and be considered small within your particular industry
  • Operate for profit
  • Have reasonable equity to invest
  • Do business in the United States or its possessions
  • Business owners must be U.S. citizens or legal permanent residents
  • You must have tried to use other financial resources, including personal assets, before applying for a loan

If you’re working with SmartBiz Loans and its bank partners, additional qualifications for an SBA 7(a) working capital loan from $30,000 to $350,000 include:

  • Time in Business: 2+ Years
  • Business owners must have personal credit scores above 650
  • Cash Flow: Sufficient business and personal cash flow to service all debt payments demonstrated by tax returns and interim financial data
  • Public Records: No bankruptcies or foreclosures in the past 3 years; no outstanding collections; no open tax liens
  • No delinquencies and/or default on government loans

In applying for an SBA commercial real estate loan of $500,000 to $5 million through SmartBiz®, the additional qualifications are:

  • The real estate must be majority owner-occupied. This means at least 51% of the square footage of the property you’re buying, or refinancing must be occupied by and used by your business.
  • Time in Business: 2+ Years
  • Business owners must be U.S. citizens or legal permanent residents
  • Business owners must have personal credit scores above 660
  • Cash Flow: Sufficient business and personal cash flow to service all debt payments demonstrated by tax returns and interim financial data
  • Public Records: No bankruptcies or foreclosures in the past 3 years; no outstanding collections; no open tax liens
  • SBA Specific Requirements: no delinquencies and/or default on government loans
  • The rent replacement option requires a loan payment that does not exceed the current monthly lease expense

 

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SBA 7(a) Loan - Uses of Proceeds

Once you’ve determined that you prequalify for an SBA 7(a) loan, it’s time to determine use of proceeds. Depending on the amount you want to borrow, you can use the funds from an SBA 7(a) loan for a variety of purposes.

  • $30,000 to $350,000: Loans of this amount can be used for working capital (such as operational expenses, marketing, hiring, etc.), new equipment purchases, and refinancing existing business debt not secured by real estate (such as cash advances, business loans, and equipment leases).
  • $500,000 - $5 million: Loans of this amount can be used for the purchase or refinance of commercial real estate that is 51% owner-occupied.

Document Check List

SBA lenders want to know if your business is healthy enough to take on a low-cost loan. In other words, can you make every payment on time for the life of the loan? In order to assess business strength, a number of financial documents are required. Because SBA loans are guaranteed by the government, slightly more paperwork may be required. But the low-rates, long-terms and very low monthly payments are worth it. Additionally, you’ll get a clear view of where your business stands if you haven’t crunched the numbers before.

To simplify and expedite the application process, SmartBiz uses intelligent automation to request only those documents relevant to your specific application.

Following are some of the most commonly requested documents:

  • Personal & Business Tax Returns
  • Personal Financial Statements, required from each individual owning 20% or more of the company
  • Profit and Loss Statement
  • Balance Sheet
  • Collateral
  • Proof of Appropriate Insurance Coverage

Other documents, such as business licenses, Articles of Incorporation, commercial leases, or franchise agreements, may be requested depending on the particular loan application. A solid strategy is to work with your bookkeeper, accountant or tax preparer to help prepare the required documents.

For more information about the benefits of an SBA loan, check out this article from the SmartBiz blog: SBA Loans – the Best Bet to Fund Your Business. You’ll learn how real SmartBiz customers have used funds to fuel growth and savings.

 

* The information provided through SmartBiz Advisor, including the Loan Ready Score, is for educational purposes and is not the same as scores used by lenders for credit decisions. SmartBiz Advisor is not a financial or legal advisor as defined under federal or state law. Use of this information is not a replacement for personal, professional advice or assistance regarding your finances or credit history.

 What you need to know: The information provided through SmartBiz® University and the articles contained therein are for educational purposes only. Use of this information is not a replacement for personal, professional advice or assistance regarding your finances or credit history.