3 Steps for Small Business Owners to Receive an SBA Loan

One of the least favorite tasks of any entrepreneur might be raising capital. After lenders clamped down following the Great Recession, it became even tougher to access small business loans.  Credit is starting to loosen up, however, so if you’ve been holding off on applying for a loan, it’s time to get the process started.

Whether you’re a restaurateur or a retailer, having access to capital can help you take your business to the next level. One great option to consider is an SBA (Small Business Administration) loan.  SBA loans have some of the lowest interest rates and monthly payments in the market because they have 10 year terms and no prepayment penalties. Also, these days, you can secure up to a $350,000 SBA loan—in as little as a week after completing the application— for business needs such as equipment or real estate purchases, debt refinance, or working capital through SmartBiz, the #1 online SBA loan marketplace.

There is a lot of misconception surrounding SBA loans, specifically about how difficult and time consuming they are to apply for and secure. New online vendors and processes are available to make it easy to quickly access the low cost capital small businesses need from a trusted source.

Follow these steps to make the SBA loan application process as painless as possible:

1.  Beef up your credit. Lenders will look at both your personal credit score as well as your business’ credit history, so you’ll want to make sure both are in good shape before you apply for a loan. You won’t be automatically disqualified if you have previous bankruptcies or foreclosures, though they could make it more difficult to borrow and many lenders require at least 3 years of seasoning.

You’re entitled to get a free credit report from each of the credit bureaus via AnnualCreditreport.com. Request those a few months before you apply for a loan to make sure that there aren’t any errors on your report that could be pulling down your score. Once you’ve eliminated errors, sign up for a service like Credit Karma, which will monitor and analyze your credit score and provide recommendations for improving it.

If your credit needs work, focus on paying all your bills on time and reducing outstanding debt. Avoid applying for new credit, such as opening new credit cards, right before you apply for a small business loan.

Consider building up your business credit history by getting and responsibly using a small business credit card.  Check out a comparison site like NerdWallet.com to find the best card for you.  Get a DUNS number from Dun & Bradstreet and submit vendors that you are paying on time to them to build up your D&B rating.

2.  Get organized. As with any loan, you’ll need to provide plenty of paperwork. Be ready to show a potential lender several years worth worth of tax returns, account statements, and other important financial documents related to your business such as leases, contracts, and incorporation papers. Have on hand your business’ quarterly financial statements and projections for the coming year. For borrowers that are buying an existing business, you’ll need documents that can illustrate its past financial performance.

If you don’t have an organized accounting system in place, consider using a vendor like Xero, Quickbooks Online or Freshbooks to get started. That will reduce the time you spend doing accounting and make it easier to show a lender what they need.

3.  Have a plan. Your lender is going to want to know exactly how much money you need, what you need the money for and how you’re going to pay it back. If you don’t have answers to these questions, put a plan together.

Spend some time evaluating your plan as well as your current and projected cash flow to be sure that you’ll be able to pay back the money that you want to borrow. Build in a cushion, so that you’ll be able to meet your loan obligations even if the unexpected pops up.

Sharing your business plan and cash flow projections with a lender is particularly important for younger businesses who may not have a lengthy business credit history.

While it may seem intimidating to apply for an SBA loan through the traditional process, there are now online options to choose from. By carefully preparing your financial profile and documents before starting your application, you’re positioning yourself—and yourbusiness—for success.


Evan Singer is president of SmartBiz Loans and is responsible for the overall profitability, growth and success of the company.

Written by Evan Singer