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How do I get a small business loan?

Written by: Plan Your Business

Article Overview: You should prepare a business plan, including your loan proposal, and submit it to a local lender. If the lender is unable to approve your loan, you may request that your application be submitted, by the lender, to the SBA. The SBA can guarantee up to 80% of a small business loan; however, the lender must agree to loaning the money with the SBA guarantee. The lender will then forward your loan application and a credit analysis to the nearest SBA District Office. If the lender needs SBA applications and/or guidance it may contact the nearest SBA District Office by going to SBA. Upon SBA approval, the lending institution closes the loan and disburses the funds.

How do I get a small business loan?

How do I get a small business loan?

You should prepare a business plan, including your loan proposal, and submit it to a local lender. If the lender is unable to approve your loan, you may request that your application be submitted, by the lender, to the SBA. The SBA can guarantee up to 80% of a small business loan; however, the lender must agree to loaning the money with the SBA guarantee. The lender will then forward your loan application and a credit analysis to the nearest SBA District Office. If the lender needs SBA applications and/or guidance it may contact the nearest SBA District Office by going to SBA. Upon SBA approval, the lending institution closes the loan and disburses the funds.

For further information and eligibility requirements, please go to financial assistance basics.

How do I get a small business grant?

At this time, Congress has not set aside any monies for grants to start and/or expand a small business. SBA does provide a loan guarantee program for loans made by your local lender. The SBA guarantees loans that the lender could not normally approve. However, all funding is handled through your local lender. For basic information visit Grants.

How do I get started in a business?

The U.S. Small Business Administration (SBA) provides a wealth of information on starting a business at the SBA home page sba.gov under "Small Business Planner." You will find information on writing a business plan as well. You may take advantage of SBA’s resource partners. The Service Corps of Retired Executives (SCORE) and the Small Business Development Center (SBDC) provides free one-on-one counseling to those interested in starting and expanding a business. This includes critiquing your business plan, legal requirements, marketing, and licenses needed for your business. To find the location nearest you, please visit us at SBA and click on your state.

How do I get a business license?

Licensing is generally handled through your state or local government. You will need to consult your local telephone directory in the "Government" section for an office that will assist you with a license or permit. See SBA here.
For FREE one-on-one counseling, please go to SBA's home page sba.gov and select "Local Resources" for an area local contact nearest you. The Service Corps of Retired Executives and the Small Business Development Center can assist you with your business venture.

How do I write a business plan?

If you go to SBA's home page sba.gov and select "Writing a Business Plan" under “Small Business Planner.” You will find information on starting a business and writing a business plan. Under "SBA local resources" you can find local contacts such as the Service Corps of Retired Executives and the Small Business Development Center that provide FREE one-on-one counseling in the area of starting and expanding a small business. They can assist you by critiquing your business plan and your business ideas. You can locate a center by selecting "Local Resources" under sba.gov as well.

What type of collateral do I need for a loan?

Repayment ability from the cash flow of the business is a primary consideration in the SBA loan decision process but good character, management capability, collateral, and owner's equity contribution are also important considerations. All owners of twenty percent (20%) or more of the business are required to personally guarantee SBA loans.The SBA does not deny approval for a SBA Guarantee Loan solely due to lack of collateral; however, it can be used as a reason in addition to other credit factors. For more information on requirements on a SBA Guarantee Loan as well as our guarantee loan programs available, please visit us at SBA.

Is there any business assistance available in my area?

Yes. There are 12,400 Service Corps of Retired Executives (SCORE) chapters and approximately 1,000 Small Business Development Centers (SBDC) nationwide. SCORE provides free expert advice based on many years of firsthand experience and shared knowledge on virtually every aspect of business. The SBDC provides a variety of management and technical assistance services to small businesses and potential entrepreneurs. To locate the nearest SCORE or SBDC in your area, please visit us at SBA and click on your state.

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Women getting financed - Spouses shouldn't be co-signers, they should be part of the loan. Lenders prefer married couples to apply together, it stregnthens the loan because the female can show outside income while she's managing her new business. Outside income means showing a lender there is other income aside from what she is drawing on her new business. A lot of women apply alone and only show their assets and do not include their husbands which is a mistake. All assets, regardless of who's name they are in are considered joint assets in a lenders eye. When you show all assets it stregnthens the loan because you are showing stronger net worth / collateral making for easier loan approval. We understand that the woman prefer to do it alone, but she has to ask herself what's more important getting financed or trying to do it alone? A husband can be on a loan application at a very small percentage (5%) and doesn't ever have to take part in running the business. And when listed on the application (under 20%) the lender will not look into the husbands credit or personal history (so he is pretty much kept out of the loop) but can help stregnthen that loan in order to obtain approval.
Would You Trade Your House For Business - The answer is no , I won't. I will definetly save enought ,or get bank loan or even start business small, no hurry, no worry, Take small step at one time, you will reach your destination, All the best everyone, Tracy ho
Micro Loans - That's interesting Russell. The following is more information on Micro Loans and anyone within the USA who would like a list of Micro Loan Lenders (listed by State) I have that information! Just let me know and i'll get it out to you in my spare time. The Microloan Program provides very small loans to start-up, newly established, or growing small business concerns. Under this program, SBA makes funds available to nonprofit community based lenders (intermediaries) which, in turn, make loans to eligible borrowers in amounts up to a maximum of $35,000. The average loan size is about $13,000. Applications are submitted to the local intermediary and all credit decisions are made on the local level. Terms, Interest Rates, and Fees: The maximum term allowed for a microloan is six years. However, loan terms vary according to the size of the loan, the planned use of funds, the requirements of the intermediary lender, and the needs of the small business borrower. The maximum loan amount is $35,000, however, the average loan amount is around $13,000. Interest rates vary, depending upon the intermediary lender and costs to the intermediary from the U.S. Treasury. Generally these rates will be between 8 eight percent and thirteen percent. Collateral Each intermediary lender has its own lending and credit requirements. However, business owners contemplating application for a microloan should be aware that intermediaries will generally require some type of collateral, and the personal guarantee of the business owner. Technical Assistance Each intermediary is required to provide business based training and technical assistance to its microborrowers. Individuals and small businesses applying for microloan financing may be required to fulfill training and/or planning requirements before a loan application is considered. How to Apply: Small businesses that are interested in applying for a microloan should contact a microlender in their area.
timeframe for loan process - In general, it should not take more than 10 - 12 weeks once the lender has your loan package. Unfortunately, I have heard horror stories where 4 - 6 months after the person submitted their loan package, they still have not closed on their loan and some cannot even get in touch with the lender for an update. (not with my business and the lenders we deal with, but others have told me this when they contacted us after they were fed up with their current lender). I think it's dependendent upon whether or not you have gone to the right lender for your type of business loan and also dependent upon whether you have packaged the loan properly. When a loan has not been packaged properly, lenders will not even review it. It can sit on their desk for any legnth of time before they get around to sending it back to you "declined" (for improper packaging). It's best to have your loan professionally packaged. That's the beauty of dealing with a loan broker or other professional who provides this type of service. It's best to seek out professionals who specialize in your specific type of business loan. The loan goes through diffrent stages. The first stage is the initial review by the lender, where the Lender will decide if you are favorable for loan approval. If you are, the loan will be sent onto the underwriters and you may or may not receive a proposal letter from the lender (it depends upon the lender). this letter may need to be signed and returned. The lenders initial review should take anywhere from 5- 10 business days. The second stage, is the underwriters review where your loan with either be approved or denied. This is a crucial stage and can take about 3- 4 weeks. Once approved you will receive an approval letter that needs to be reveiwed by you (or your lawyer) carefully. this letter needs to be signed and returned in order for your loan to go through the final stage. The third and final stage is your loan closing. This is where everything is finalized so they can fund. This stage can take another 3 - 4 weeks. Keep in mind that if you are dealing with a loan broker, you should add another 2 - 3 weeks to your loan timeframe as it will take about this long for the loan broker to gather and process all your documentation and package it and get it off to the lender (this includes delivery time).
Using your home for collateral is one thing, but... - Putting up your home for collateral is one thing, but utilizing the equity in it to finance a business is a whole other ball game and could be damaging in the long run. Do you know that if you completely finance your business with home equity instead of a busienss loan you will not be able to obtain a working capital loan later down the road? should you run into some financial troubles or wish to expand or remodel with working capital loan, you won't be able to get it if you finaced by personal means. It's always best to build a track record with a lender for future use and it's always better to be in business debt rather than personal debt. I always say: "You wouldn't hire a Plumber to do the Electrical in your home, so why would you finance a business using your home equity? Equity loans are for your home, business loans are for your business. You may however, utilize some of the equity in your home for loan down payment (depending upon your qualifications) and we can help determine whether that would be more helpful or damaging to your loan by pre-qualifying you for free. when using your home for collateral, it doesn't necessarily mean you will lose your home (in the event you cannot pay your loan payments). Lenders are always willing to work with you once you have a loan with them and they have already taken on the risk. they typically only utilize what they lien if nothing else can be resoloved (so it's basically a last resort) to go after what they lien.


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