Don’t Make These Mistakes as a New Business Owner When Getting an SBA Loan
New and growing businesses can often benefit from the programs offered through the Small Business Administration. SBA loans are an excellent tool for small businesses looking to raise capital. Because they are partially backed by the government, lenders have added peace of mind and may be willing to relax some lending criteria. They are not guaranteed money, however, so you still want to put your best foot forward in the application process. Avoid these common mistakes to maximize your chances of getting approved for your new small business loan.
Failing To Establish How Much Money You Need
You may not want to borrow money at all, but find yourself with the need to. Instead of approaching the bank or SBA with a wishy-washy proposal of “needing capital,” walk in there knowing exactly how much you need and what you are going to use it for. Take the time to define your business goals and establish exactly how much money it will take to achieve them. Then, present a detailed, itemized budget to show lenders you have a thorough knowledge of what it will take to make the project a success.
Not Taking the Time To Check (and Clean) Your Credit Report
As with any loan, SBA lenders will pull a credit report to establish the creditworthiness of potential borrowers. It is critical that you review this information first. First, check to ensure the information is accurate and fix any mistakes you do come across. Evaluate it in the same way a lender would to gauge your loan’s approval chances. For example, if you have a high debt to credit ratio, it could be construed as a sign that you need to pay down existing debt before taking on any new loans.
Applying Without the Necessary Finacial Resources
The SBA is not a miracle worker. They can help you secure low-interest loans for a business, but they do expect you to pay that money back. Like any lender, they will want to see that you are able to repay the loan and any interest accumulated. Failing to establish your ability to make monthly payments is a big red flag for any lender, including the Small Business Administration.
Another thing that can help you secure funding is a down payment. It shows you are willing to invest your own resources in the project. A higher monetary investment in the business increases your motivation to succeed.
Just because you apply for SBA loans doesn’t mean you will be approved. If you are really counting on that funding, establishing your financing needs, saving a down payment and cleaning up your credit report can help you secure that much-needed infusion of capital.