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How to Get an SBA Loan – from an Expert

Key Takeaways

  • Small Business Administration (SBA) loans are optimal if you’re looking to purchase a new business or refinance an existing business loan.
  • When applying for an SBA loan, you should be knowledgeable about the strengths and challenges of your business.
  • Choosing a Preferred Lender can make the application process faster and more streamlined.

By Gina Gallagher | Citizens Bank Contributor

You know you need a business loan. Maybe it’s to acquire a new business or to expand one you already own. Or maybe you simply want to free up cash flow by refinancing an existing loan. Most business owners are pretty astute at knowing when they need to borrow; the challenge for many is determining how to get the right loan.

Why an SBA loan may be a good choice

Cary Forman, Director of SBA and Credit Products at Citizens Bank, knows a lot about why businesses need to borrow. She leverages that experience to help a variety of businesses secure Small Business Administration (SBA) loans, which are loans guaranteed by the Small Business Administration and issued by participating lenders. “I’ve found that people generally want to borrow for two reasons: they’re looking to expand a business or refinance an existing business loan. Those who wish to expand usually want to acquire a new business, such as a second location for a restaurant. The appeal of an SBA loan is that the borrower doesn’t have to be fully collateralized to qualify for the loan,” said Forman.

That benefit comes courtesy of the SBA, which provides a guarantee that removes some of the risk for lenders to approve loans, thereby allowing lenders to offer less stringent underwriting requirements. Because of that guarantee, SBA loans are also ideal for borrowers who wish to refinance existing debt. “I recently had a client who had a 7-year loan and was looking to improve cash flow. An SBA loan was a good alternative because it allowed them to extend the term to 15 years, thereby freeing up cash flow. Traditional loans don’t offer terms that long,” said Forman.

So if you’re looking to acquire a business or to refinance existing debt, odds are that an SBA loan is probably the best choice. Forman does believe, however, that a good loan officer should be able to help you determine the loan that will work best for your needs. “I’ve referred clients to other parts of the bank or other lenders when I couldn’t help them. In my specific case, it helps that I was a former CFO and business owner,” she said.

Taking the next step

So what more can you do once you’ve determined an SBA loan is right for you? Forman recommends taking these important steps to prepare for SBA financing:

  • Get your affairs in order: “You’ll need to provide 3 years’ personal and business tax returns. You also need to be aware that you’ll be ineligible for an SBA loan if you’ve been convicted of any financial felonies or have defaulted on any other government loans,” said Forman.
  • Gather financial statements: “Your SBA lender will provide a checklist of documents you’ll need to fill out as well as required financial statements,” said Forman. Among those documents: a balance sheet, profit and loss statement (P&L), and cash flow forecast.
  • Be able to speak knowledgeably about your business: “You have to be able to openly discuss the strengths and challenges of your business. Though your SBA lender will apply underwriting standards to your loan request, they want to know that you have a strong and realistic grasp on your business. Your character and experience count a lot toward any loan decisions made,” said Forman.
  • Fill out the SBA application: Forman cautions borrowers to “always be honest on your SBA loan applications.”
  • Choose a Preferred SBA Lender: SBA grants Preferred Lender status to those lenders who make a high volume of loans. “Preferred Lenders are able to make most credit decisions without getting approval from the SBA. For borrowers, that means a faster, smoother, and more streamlined application process,” said Forman.

Ready to grow your business?

Learn more about SBA loans. As a Preferred SBA lender, Citizens offers a streamlined application and fast decisions. We will, however, take the time to listen and understand your business and help you find the solution that works for you.

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