Also in 2015, the SBA began offering an incentive to help get companies licensed as “early-stage small business investment companies,” in an effort to increase capital for entrepreneurs and startups. This new incentive would allow licensed companies who put at least 50 percent of their investment dollars in early stage small businesses to qualify for federally guaranteed loans. The goal is to support President Obama’s Start-Up American Initiative and to encourage private sector investments in startups and small businesses.
For businesses that won’t benefit from the incentive, since it applies to those that have never achieved positive cash flow from operations in any fiscal year, an SBA guaranteed loan is still an option. The SBA doesn’t actually make direct loans to businesses; it provides a guarantee to banks and lenders for the money they lend to small business owners, (which alleviates the risk of lending to business owners who don’t qualify for traditional loans). There are a variety of different loans to choose from, but the 7(a) General Small Business loan is the most common.
How to Get an SBA Loan
Before you apply for a loan, there are several things you may want to get in order. During the small business loan application process, you may be asked for some or all of the following:
Personal background information including previous addresses, other names used, criminal record and educational background, among other things
Income tax returns (most loans will require personal and business returns for the previous three years)
Bank statements (often lenders will require personal and business statements for the past year)
Collateral document describing the cost/value of personal or business property that will be used to secure a loan
Legal Documents, including business licenses and registrations required for you to conduct business; articles of incorporation; copies of contracts you have with any third parties; franchise agreements; and commercial leases
You’ll also want to be prepared for the questions your lender might ask. You should know:
Why you’re applying for the loan
How the proceeds will be used
What needs to be purchased and who your suppliers are
The SBA also has resources specifically to help veterans begin the SBA loan process, such as the Boots to Business entrepreneurship training program. Go to the SBA’s Office of Veterans Business Development website for more information.
Finding better ways to get all small businesses access to capital is imperative for the stabilization and growth of our economy. With the unemployment rate the lowest it’s been since 2008, things are looking up, but small business is too powerful a force to not get behind and an SBA loan can help business owners get much needed access to capital to grow and potentially hire. Learn more about SBA loans at SBA.gov.
Judy Hackett is chief marketing officer of Dun & Bradstreet, Emerging Businesses. Contact her at firstname.lastname@example.org