Owning a business is a critical component of achieving the American dream. Still, financing the purchase of commercial real estate or funding a startup company can be challenging. If you are looking to secure funding for your business, you may want to look into applying for SBA loans. Before you do, though, you should know a few things about this type of financing.
Plan for an Arduous Process
Bankers usually prefer not to loan to businesses they don’t know. While securing an SBA loan is a big deal, the application process is often arduous. If you don’t prepare yourself mentally, you may not make it through to the end of the application. Before applying for your loan, consider whether you actually need financing from the SBA. If you can obtain funds without going through the challenging SBA loan process, you may save yourself a few gray hairs.
Establish Business Accounts Early
If you want to borrow money from a bank that loans pursuant to SBA programs, you need to provide extensive documentation about your business. While it can be tempting to mix personal and business accounts, doing so can be a mistake. As such, try to keep your personal finances separate from you business dealings. Also, get your company’s business records in order before applying for SBA loans. Then, expect to provide tax returns, income statements and other documentation as part of the loan process.
Don’t Forget About Your Personal Credit Score
When making loan decisions, bankers look for repayment potential. If your business is not likely to have the funds to repay your SBA loan, you can expect a denial. Still, many startups do not have deep financial records. To overcome this problem, bankers often ask to see the personal credit history of borrowers. Simply put, if you have a bad credit score, you may have trouble obtaining an SBA loan, regardless of the health of your new business. To improve your credit score, request a copy of your credit report from a credit agency. Then, try to eliminate some of your personal debt. Also, dispute any incorrect information you discover in your credit history.
SBA loans help motivated entrepreneurs and business leaders secure funding for their ventures. While these loans are not right for everyone, they do have some obvious advantages. If you are considering starting a new business or expanding an existing one, you may want to consider applying for a loan from the SBA.