How To Know If An SBA Loan Is Right For You
Loans that are backed by the Small Business Administration are designed to help businesses grow. Their terms are set in ways that directly advantage long-term planning, and they do require that business owners show a commitment to financing themselves first, but they reward this with forgiving approaches to fees and the repayment period. There are a few questions to ask about your business that will help you understand whether or not an SBA loan is right for your company.
Are You Up-to-Date with All Your Taxes and Debts?
The SBA does not require perfect credit from applicants. In fact, part of its mission is to provide credit to people who need it, and that usually does mean people who have some issues in their credit history that make traditional bank loans hard to obtain. At the same time, you must be current on all of your existing debts with the United States government, including tax debts. This is part of the basic requirements for application. It does not mean that you can not have those debts, just that you have to be up-to-date on your payments.
Have You Used All Available Assets?
To be granted an SBA loan, you need to be able to show that you have already gone “all in” and leveraged your own assets to make the business work. This requirement is designed to make the loans more accessible to owners who do not have as many assets to commit, so don’t worry if you have very little to use as collateral. You have to know, though, that SBA loans are secured with collateral. Any assets that have not already been committed to supporting the business will probably be required to be included in your collateral package for the loan.
How Clear and Comprehensive is Your Business Plan?
The third major area to consider when applying for an SBA loan is your business plan. To get approval, you will need to show that you have a concrete design for the use of the money that will lead to the growth of your business and support the servicing of the debt. You also need to be able to demonstrate that you need this loan in order to meet those goals. That is, you have to show that the loan will make your business more successful, and that this level of success can only be reached with a loan. If that sounds like your situation, then chances are good that you are a candidate for loans backed by the SBA.
In addition to these considerations, there are some basic requirements to meet, too. The SBA has definitions for small business that need to be met, and you do have to be operating within the United States and operating for profit. As long as you meet all those requirements, though, there is a good chance that your company would benefit from an SBA loan.