How To Prepare for an SBA Loan

The prospect of getting approved for an SBA loan can be exciting and frightening at the same time. Will you say the right things? What if you forget your presentation? These are questions that many people ask. Follow these suggestions to enjoy a smooth application process.

Ensure You Have Stable Cash Flow

One of the first steps you can take to prepare your business for an SBA loan application is to ensure you have solid financial health. Your cash flow is a measure of the profits coming in and the money going out. Both aspects are important for showing lenders that you’re an excellent entrepreneur.

To strengthen your cash flow, you need to reinvest a portion of profits every month in business growth. Put your capital to good use by investing in things that help you to build a strong customer base, such as web development or equipment purchases. When you can balance the cash coming in and continue growing as a business, it signals a good investment to lenders.

Prepare Your Documents

SBA loans carry a lot of document strings attached, mainly because the government has specific requirements for what type of business qualifies. For example, you may need to provide proof of the amount of employees you have as well as information about your bank account balance.

What documents should you provide with your application? Each lender has specific requirements, so you’ll want to request more information from the bank ahead of time. Generally speaking, it’s good to prepare many months or several years of balance sheets, also known as profit and loss forms, in addition to tax returns. You may also need information regarding your business plan and how you want to use the funds.

Build a Good Working Relationship With Your Lender Ahead of Time

It can be a big help to establish a working relationship with your bank long in advance. Before you contemplate applying for an SBA loan, you may want to apply for a business line of credit or working capital financing. This has two benefits. First, it allows the bank to see that your company is trustworthy. Second, it helps you avoid giving the impression of being desperate for a loan.

If you’ve already had dealings with the bank, and especially if you’ve talked about your long-term goals for expansion, then lenders can see applying for SBA financing as a perfectly logical step for you. That way your request doesn’t throw up any red flags.

The truth is that as long as you’re reasonably prepared, the process of applying for SBA financing is relatively straightforward.

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