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5 Important Steps to Take When Applying for an SBA Loan

Key Takeaways

  • Before you apply for an SBA loan, determine your borrowing purpose and the amount you need.
  • Work with your CPA to prepare the financial statements and projections required with your application.
  • Choose a lender that offers other financial services to help your business, not just quick SBA loans.

By Gina Gallagher | Citizens Bank Contributor

You need a business loan. It may be to purchase new equipment, manage seasonal cash flow, or finance a new building. Your CPA advised you to apply for a Small Business Administration (SBA) loan to get the affordable financing you need. You’ve heard about SBA loans, but you have questions, including one very important one: How do you apply?

To provide insight, we talked to Robert Camara, Business Development Officer and SBA specialist at Citizens Bank, who shared these five steps to make the SBA application process easier:

  1. Get prepared: Camara urged borrowers to do a little homework before they start the actual application. “Applying for an SBA Loan is not like applying for a mortgage where you are told the amount for which you qualify," he said. "With an SBA loan, you need to have a specific borrowing amount and purpose, and know how much money you'll need to have on hand. For example, if you plan to use an SBA loan to purchase a commercial building, you should know the purchase price and the down payment required. You should also have a signed Purchase and Sale agreement, which you'll provide to the lender.”

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    "With an SBA loan, you need to have a specific borrowing amount and purpose, and know how much money you'll need to have on hand."

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  2. Gather your financials: In addition to having a borrowing purpose and amount, you’ll need to present financial statements and projections. “Lenders want to know the financial health of your business and how you'll pay back the money you owe,” said Camara. That means if your business needs permanent working capital to hire a new employee, you must show the revenue your business will generate to pay off the debt incurred with the loan. You must prepare financial statements such as a balance sheet, profit and loss statement (P&L), and cash flow forecast. “Your CPA can help with the preparation of these documents. In fact, most of the business owners I deal with work with CPAs and attorneys who are quite familiar with SBA lending and requirements,” said Camara.

  3. Find the right fit in a lender: With your financial statements and projections in order, you can begin your search for a lender. “One of the most important things to consider when choosing a lender is to find one who can suit your needs — not just today, but in the future. Unfortunately, many business owners take the path of least resistance and choose a lender who can do the loan quickly. There's more to it than that. You want a lender that offers other services in addition to SBA loans, such as cash management services, to help you manage the cash flow of the business,” said Camara. He also pointed out that a good lender will work alongside an attorney and accountant to help the business. “I’ve seen a number of business owners achieve tremendous success and avoid mistakes because they had trusted advisors.”

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    “One of the most important things to consider when choosing a lender is to find one who can suit your needs — not just today, but in the future.”

    - Robert Camara, Business Development Officer

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  4. Understand eligibility: “The qualifications for an SBA loan can be quite complex; however, there are some general guidelines businesses must meet. For example, some types of businesses are not eligible, like nonprofit organizations and those in certain industries such as investment banking firms or insurance companies. There are additional guidelines that surround the character of the business owners. For example, has the business owner had any legal problems such as arrests/convictions recently or in the past?”

  5. Fill out the application: Once you’ve chosen a lender and prepared your financials, you’re ready to apply. SBA forms can be somewhat tedious and confusing, so it’s helpful to choose a lender that offers SBA specialists who can guide you. “Having people familiar with the systems, procedures, and requirements can save time,” said Camara.

If you’re considering applying for an SBA loan, you can make the process easier by taking some important steps before you apply. Be clear about the amount and reason you need to borrow, work with your CPA to prepare your financials, and find a lender who will support the needs of your business today and in the future.

Ready to take the next step?

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. Learn more about our SBA loans.

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