Are you a small business owner seeking growth and savings? SBA loans are known as the “gold standard” with low rates and long terms that won’t crunch your cash flow. Proceeds from a low-cost SBA loan can be used for a number of business building initiatives. Do you need to consolidate existing high interest debt, buy equipment, beef up marketing or even purchase owner-occupied commercial real estate? An SBA loan can be the right solution to help you reach long and short-term business goals.
As with every loan, there’s a fair amount of paperwork you’ll need to produce to show SBA banks that you’re able to make the low monthly payments.
At SmartBiz Loans, we’ve streamlined the SBA application process and work with entrepreneurs every day to guide them through the online application process. Following are several common issues borrowers face and how you can simplify and speed up getting to a “yes”.
Being disorganized in your personal life is a pain; if you’re disorganized in your business life, you can increase your chances of pain-free process. Organize business and personal paperwork in advance when applying. You’ll need both. Things will move along easier and quicker. You’ll spend less time and get funded faster.
Pro Tip: Each lender has different document requirements. Investigate what is needed and make sure you have up-to-date paperwork ready to go before you start the loan process.
Not Updating the Books Monthly
Closing out the monthly books often gets pushed to the bottom of a busy small business owner’s “To Do” list. If your books need updating, the loan application process can screech to a halt. Look into accounting software like QuickBooks Online that can simplify the bookkeeping process or use the services of a professional accountant/CPA.
Pro Tip: Robert Schulte, founder and CEO of LumaTax and a former Senior Tax Auditor for California, suggests that business owners never rely on credit card statements or checks but keep your own current records.
Not Asking for Enough Money or Asking for Too Much
One of the first things lenders need to know is how much you want to borrow and for what. Time to do the math! Determine how much you need to borrow to meet your business objectives. Have a solid number and a clear outline of what you plan to do with the loan to present to lenders.
Pro Tip: There are two documents that will help you determine how much to borrow – your business plan and cash flow analysis. Do a deep dive into both to come up with a number that can help grow your small business without monthly payments crunching cash flow.
Unfamiliar with Accounting Terms
Of course, many entrepreneurs can establish a successful business without being an accountant. However, when it comes to running a business smoothly and profitably, there are accounting terms that you need to know. When it comes to applying for a loan, accounting terms will come up. The QuickBooks resource center outlines 24 accounting terms every business owner needs to know.
Pro Tip: If you’ve decided to forgo the DIY route, work with a financial professional who can help you navigate the loan process. Your accountant or bookkeeper should be able explain complex terms in an easy to understand way to help your application move forward.
Not Monitoring Your Business Credit Profile
This is key. Small business owners should regularly monitor both their personal and business credit profiles from all major business credit-reporting agencies (Dun & Bradstreet, Equifax, and Experian). Make sure that there are not any mistakes. A simple error can make it harder for you to get approved for a loan. Credit reports and scores are dynamic, constantly changing based on various criteria. Enroll in a business monitoring program that can flag problems and let you know when your score drops or increases.
Pro tip: If your numbers aren’t quite where they need to be to qualify for an SBA loan, there is good news. Strategies exist to help you raise your scores and manage your credit more effectively. The US Small Business Administration has an article to get your started.
Unaware of Fees, Service Charges and Added Costs
The SmartBiz blog has a list of additional costs that might be relevant to your loan. Origination, processing and guarantee fees are a few that you might come across. Work with a lender who is 100% transparent to determine how your loan amount will be impacted. Another question to ask is if there are penalties for an early payoff. Also, the APR of a loan includes fees in the calculation, not just the interest rate so is a good way of comparing the cost of various types of loans.
Pro Tip: Determine how extra costs will affect your loan payments so there are no surprises when funded.
Again, it’s important to work with a lender that believes in 100% transparency. Ask your point of contact to share with you a realistic timeline for application completion, review, underwriting and funding.
Pro Tip: In general, the quicker you are able to produce requested documents; the quicker your loan will be approved and funded.
The Smart Hack
The application process can be intimidating. However the payoff in getting an SBA loan, can fuel business growth and savings, strengthening your bottom line and setting you up for success.
In addition to the above strategies and tips, it’s a good idea to vet any SBA loan providers before you start the process. Check out Trustpilot, ConsumerAffairs or Google Reviews. Read reviews and rankings from reputable financial sites that cover SBA loans like Smart Business Hacks.
Suzanne Robertson is the Senior Marketing Content writer for SmartBiz Loans, an innovative, online company that makes applying for SBA loans fast and easy for small business owners. She is the writer/editor for the award-winning SmartBiz Small Business Blog that offers information specifically for the established small business owner. Suzanne lives in Los Angeles with her husband and two daughters. When not gulping coffee, she enjoys yoga, beach time and everything Disney.