Although SBA loans can be used for diverse purposes, getting approved for this loan comes with some vital qualifications. This is to ensure that even though you are a new or a small business, you are capable of meeting your financial obligations. And to be sure you are responsible enough to pay back the all-important repayment of the loan they may grant you.
Here are some of the requirements lenders may look for:
Business Plan
Lenders tend to look for a concrete and profitable business plan. You must convince them that you can project an income that can sustain your company and pay your debts simultaneously. Also, you must have at least a contingency plan in an event that your company struggles with sales or profit.
Credit Score
If you have a good credit score and history, this is a big plus factor for your loan application. SBA loans require a credit score of at least 680. This is one of the foundations your lender will look at to see if you can fulfill repayment trouble-free.
Collateral
Collateral becomes useful if a borrower has been declared a defaulter. Your assets that have been declared collateral will be seized in case of a default. Collateral may be defined as property or other assets, such as cash, stocks, machinery, and/or equipment. The lender and SBA will split your collateral to compensate them for their loss.
Documents
Company and personal documents are important to your lenders. They give vital information and prove your legitimacy as a borrower. If all goes well and the paperwork requested is received, you are one step closer to acquiring your loan. A list of documents they may require are below:
- Borrower information form
- Personal history statement
- Financial statement (personal and business)
- Profit and Loss statement
- Projected financial statement- having a one-year projection of income and finances
- Your business license
- Business history and overview
- Your loan application history
- Income tax returns
- Business ownership documents
- Business lease
Additionally
The SBA might look for other criteria to approve your loan. You have to be strong from every side. The points you have to consider to qualify are:
- Make sure your company has official registration under a for-profit business
- You must be operating your business legally
- No criminal cases should be in your name
- Employees in your company should be fewer than 500
- Your business should have at least two years of experience
- Your business must be US-based
- Make sure to show you can manage your resource and funds
