Small businesses inevitably require funding in the early stages. One option for startup financing is a loan from the U.S. Small Business Administration such as an SBA 7(a) loan, an SBA express loan or an SBA microloan. Here are the steps you should take if you are interested in applying for an SBA loan.
Create a Business Plan
A comprehensive business plan demonstrates to the SBA that you have put enough effort into research and planning to increase your company’s chances of success. Your plan should include an executive summary, an overview of what your business offers, a list of your competitors, identification of your target market, a financial plan, financial projections, and resumes of the owners.
Analyze Cash Flow
A cash flow analysis focuses on the amount of funding your business will require. It should include a forecast of income and expenses for the next two years, the working capital you’ll need, and any major initial purchases.
Find Out If You Are Eligible
Requirements for receiving startup financing through an SBA loan include good personal credit for anyone with a 20 percent or more ownership stake and experience in your proposed industry. You’ll also need some form of collateral for the loan.
Have Your Share of the Investment Costs
You may have to come up with up to 25 percent of the investment costs yourself. Owners of startups fund their share of these costs in various ways. For instance, you may use part of your retirement funds, receive assistance from family or friends, raise financing through crowdfunding, or take out a home equity or personal loan.
Locate a Lender
Not all lenders handle SBA loans. When you have located suitable lenders, find out the fees involved, the application process, and the length of time a decision takes.
Gather Documentation
Along with your application, you will need to submit certain documents. These include a personal financial statement, three years of tax returns from the owners, and official documents such as articles of incorporation.
Submit Your Application
Complete your application and submit it with all relevant paperwork. After your application has been submitted, you may be asked for additional paperwork. You may have to wait several weeks or possibly a few months for an answer.
For more advice on startup financing through SBA loans, contact Northgate Capital Finance.