You may have heard the term "SBA loan," but it's somewhat misleading. The US Small Business Administration (SBA) provides guarantees for small business loans, not direct loans, except in disaster situations. When you seek a loan for your small business, it's possible that the lender will decide that SBA backing isn't necessary. Know what to expect.
- Know the facts about small business loans. There's no such thing as a government grant or "free money" to start a business. You'll have to put money or sweat equity into a business and be credit-worthy
- Put together a loan package and be prepared. Be ready to answer questions about the purpose for your loan, the amount, how long the loan term will be, how you plan to repay the loan, what collateral can you provide and whether you can provide a personal guaranty
- Make sure your financial statements are in order. These are an important part of your loan package and include a cash flow statement, an income statement, a balance sheet and a personal financial statement. A new business will have balance sheets based on its planned opening date and projections at one year after start-up
- Make sure your loan package is brief, to the point and emphasizes strong management and enthusiasm. Make sure your plan is neat in appearance and proofread it for errors
- Know how your loan application will be evaluated. Credit, character and collateral count. The lender makes money by making loans, and a loan officer's success is measured by her good decisions. If your loan application is rejected, find out why and address the problem before seeking a loan somewhere else