The U.S. Small Business Administration (SBA) offers guaranteed lending programs for commercial loans for small businesses. While it does not make the loans directly to the businesses, it establishes the guidelines for its partners in the lending sector. These partners include private lenders, microlending institutions and community development organizations. Small business loans structured in accordance to SBA requirements come with a guarantee the loans will be repaid, thus reducing the risk for the lender.
There are four major types of guaranteed loan programs offered by the SBA. These are the 7(a) Loan Program, CDC/504 Loan Program, Microloan Program and the Disaster Assistance Loan Program. Full descriptions of the loans are available through the SBA website on the Guaranteed Loan Programs page.
When applying for an SBA loan, you need to provide a credible application that responds to the particulars of the loan you are seeking and supports a professional image of your business. The accuracy and strength of your documentation determines your credit-worthiness and willingness of the lender to consider your application. You must first comply with the Size Standards for small business to be eligible to apply. If your business fits the description, you will need to supply the following details:
Business Profile. This describes the type of business you own, how long you have owned it, your annual sales and the number of employees you have.
Loan Request. This is a request for a specific type of loan, the amount of funding you are seeking and your statement of how you intend to use the funding.
Business Financial Statements. You must provide the complete financial statements (balance sheets) for the three fiscal year-ends prior to your loan request, as well as a current interim financial report. Your income statements must reveal your profit or loss. Your cash flow projections should be indicated, since this shows how you intend to generate the money to repay the loan. You also need to show your accounts receivable and payable broken down into 30, 60, 90 and past 90 day categories.
Collateral. A list of the collateral you are offering to secure the loan, such as property, equipment, equity in the business, borrowed funds and cash on hand.
Personal Financial Statements. Every owner, officer, partner or stockholder with at least 20 percent ownership in the business must provide a PFS. This covers a description of your personal assets, liabilities and monthly payments. The past three years of personal tax returns should be included.
Depending on the type of loan being sought, there are specific forms that must be attached to the application. The SBA provides the details of the required forms and information on how to apply for funding on the How to Apply page of its website. The requirements can change, so make a point of consulting the website or an SBA office before you fill out the loan application.