During these challenging times, it has been difficult for many business owners to stay afloat and remain financially secure. This is especially true for small businesses that are feeling the effects of little to no consumer spending.

There are still bills and expenses associated with not only their homes but their business as well. A small business loan can be beneficial to support your financial needs during a recession.

What is an SBA Loan?

An SBA Loan is a loan that the government issues to expand or start a business.

Types of SBA Loans

If you want to know how to get an SBA loan, you'll need to inform yourself of which types of small business loans are out there. It's important to note the differences between them so that you're aware of which program best suits your needs.

*SBA loan terms may vary.

  • SBA 7(a)
  • SBA CAPLines
  • SBA 504 (asset-based loan)
  • Disaster Assistance
  • SBA Export Program

How to Apply?

If you're wondering how to apply for an SBA loan, follow these comprehensive steps.

Step 1. Check your eligibility: Be sure that your company qualifies before beginning the application process

Step 2. Select a program: Make sure you choose the appropriate program for your business.

Step 3. Designate a lender: The SBA aren't the lenders for the loans; you must select a lender to provide you with the loan and process your application.

Step 4. Organize your documents: Gather all of the necessary documents needed for the application; the paperwork may vary by lender.

Step 5. Do the Application: Be as detailed as possible when filling out the application.

Step 6. Complete the forms: The forms you complete will depend on the type of loan, type of business, and your personal history, but you'll probably have to complete a minimum of two forms for SBA loans.

Qualifications

General requirements:

  • Owners must have a very good personal credit score because it may be more difficult to apply for a small business loan with bad credit.
  • A business that's based in the US and is "for-profit"
  • The company must have been active for a minimum of two years
  • Documented proof that the business unsuccessfully tried to obtain loans from alternate lenders
  • No defaults or delinquencies on other government loans
  • Your business must be defined as "small", according to the SBA definition
  • Equity was invested by the owner (reasonable amount)
  • Specific programs or lenders may have additional requirements for eligibility.

Defining a Small Business

To be considered a small business, a company has to fit the size standard, which is the largest size that a business can be while still being defined as "small". Size standards are different in every industry but they're typically identified by annual receipts and how many employees a company has.

The SBA states that there are less than 1500 employees within a business and no more than $38.5 million being spent annually.

Coronavirus Impact

The impact of COVID-19 has placed financial stress on small businesses that are trying to avoid permanent closure. The pandemic has been the catalyst for creating loan programs detailed within the CAREs Act (Coronavirus Aid, Relief, and Economic Security).

This bill offers emergency funds and other resources to small business owners and makes it possible for companies to apply for an SBA loan funded by the government.

Check here to see how to apply for an SBA disaster loan, which falls under this category.

Know Your Options

It's pertinent to understand what's available to you as a small business owner. Go over the following questions when you're seeking support from a lender to keep your business active.

  • What is the limit on borrowing?
  • How much are the interest rates?
  • Are there any down payments required?
  • Do they have a specific program for my business?
  • How much and what type of collateral do I need?
  • How can I check my SBA loan application status?
  • How do I make SBA loan payments?

These questions will help you make the best choice with the highest likelihood for approval when applying for a small business loan. To know which option is best for your business, call ROK Financial and speak with one of our experienced financial business advisors.

About the Author, Madison Taylor

Madison Taylor is the Brand Ambassador at ROK Financial. She is responsible for raising brand awareness and business relationships with business owners across the country. Madison loves that she plays a small role in getting Business Back To Business Through Simple Business Financing and looks forward to hearing what you think about the blogs she creates!Madison has been working in the financial space for six years, and loves it! When she is not at work, you will find her at home learning a new recipe to test out on her family or going on new adventures with her friends.