Small business loans offer an opportunity that might not otherwise exist for small business owners. Also referred to as SBA loans, this type of financing is available even when a conventional mortgage is not obtainable from a bank, private lender, or commercial lender. This type of financing provides an opening that can get a small business on the path to success by providing necessary funds to obtain equipment, storage, advertising, materials, rental fees, and start up cash for employee salaries.

Small Business Loan Requirements

In order to qualify for and obtain an SBA loan, the business owner must be able to meet certain requirements that have been set in place. The first and most important requirement is that the business must be able to meet the definition of a small business. This includes all of the following facets:

  • The business must be owned independently.
  • It must be operated independently.
  • It must meet the specifications for the size of a small business including the number of employees and the amount of revenue that is generated.
  • It cannot participate in its chosen industry as a major company.

Small Business Loan Documentation

Small business owners must bring certain types of documentation with him when submitting an application for an SBA loan. This includes a loan request, business plan, business financial statements, personal financial statements, description of offered collateral, and a personal resume.

The loan request provides documentation on the details related to the intended purpose for the loan.

The required business plan should include copies of the business certificate and lease as well as the specific nature of the business. It should list the number of employees, the type of ownership structure, the number of years it has been in existence, and the actual or projected earnings for the year.

Business financial statements are an integral part of the scenario. Complete statements related to the finances of the business must be presented for the previous three years or as many years that the business has been operating if less than three years. This documentation should include federal income taxes (signed and dated), current business balance sheets, projected income for the current year, current finances, and information on any existing subsidiaries.

Personal financial statements should also be provided and should include documents for the previous three years. These documents should include personal federal income taxes,

A description of the collateral that will be offered to secure the loan is required. It should include all relevant aspects.

A personal resume must be submitted not only for the owner of the small business, but also for any employee in a high-level position such as managers and supervisors.

Small Business Loan Facts

Once the company has been approved for a small business loan, it must agree to comply with all of the regulations set forth by the SBA or Small Business Association. These regulations include the practices it will use to conduct its employment practices in regard to avoiding discrimination as well as offering any public services that are related to its business field.

While SBA loans are obtained through the private lending sector, the loan itself is guaranteed by a governmental agency. This fact makes this type of loan more accessible for those business owners who cannot obtain a loan through conventional methods. The governmental agency that guarantees these loans is often referred to as the SBA, which stands for Small Business Association.

As with any type of loan, the borrower must sign an agreement in which he pledges to repay the loan according to the terms that have been set for it. Once all of the requirements have been met, the SBA is able to grant approval to the borrower for the loan.

Additionally, SBA loans are offered in a variety with differing terms and interest rates. Typically, the interest on SBA loans is a bit lower than that attached to conventional ones. The borrower must select from among the choices for the specific loan that he believes best meets his business needs. Within reason, the lender will offer suggestions to help guide the borrower in this process.