How do I apply for a Small Business Administration Loan?

What is it?

A SBA guaranteed Loan is a guarantee to the lender, so in case the borrower defaults, the lender is guaranteed a portion of the loan by the SBA. (You are still liable for the loan, so your obligation does not go away). The SBA does not make loans to businesses; the lenders provide the funds.

Why?

SBA guaranteed Loans are one of the first financing options for start-up business, or businesses with short operational history.  Straight commercial loans are usually out of reach for those businesses (most banks require businesses to be in operations for 2 years to qualify)

How to obtain the loan?

For loans under 50,000 it can be as “simple” as filing out an application, no business plan or financial projections required.  However, lenders will look at you, your credit, your assets, and your idea carefully before approving a loan, so it makes sense to provide the banker with a business plan and financial projections with your application. 

On the other hand, if you feel that you have a good idea, good credit score (over 700), a co-investment into the business -a minimum SBA standard is 20% of total project cost should come from your own funds, but the bank can choose a more conservative standard depending on the type of business- don’t have a lot of personal or business debt, and may provide collateral, then you can apply with just the paper application. 

For loans over 50,000 you will need a business plan and financial projections, in addition to the aforementioned criteria.  As a rule of thumb, your business plan should be more detailed if you are requesting a higher loan amount.

For help with your business plan and financial projections refer to our Business Plan section