Deciding to start your own small business is exciting. When you have a great idea for running your own company, you might have the tenacity and dedication to get it up and running. However, you need the right level of funding to start things up. Here are tips for getting an SBA loan.

According to Lantern by SoFi, “Before you start to apply for unsecured startup business loans, it can help to do some prep work to strengthen your pitch. Even with bad credit, you can present an in-depth business plan that outlines your strategies for success and how you plan to use the funding. A business forecast can also be helpful in giving the lender an idea of your expected cash flow in the coming months or year. As a startup, you may need to provide personal information as well, such as your tax returns.”

Features of an SBA Loan

A small business loan provides new entrepreneurs to get the funding they need to get their business off the ground. There are certain features of an SBA loan that are important to know. They include the following:

  • At least seven years of working capital
  • At least seven years of inventory
  • At least seven to 10 years of equipment
  • Up to 10 years’ worth of business acquisition
  • Seven to 25 years of debt refinance
  • 25 years of occupancy for your commercial real estate

With these features in place, it’s possible to secure an SBA loan that has good interest rates that range from 2 to 3.5 percent.

SBA loans are offered by the Small Business Administration or SBA, a government agency. The loans are backed by the government as a way to give small business owners an easier opportunity to get the capital they need to move their businesses forward.

How to Qualify for an SBA Loan

There are certain tips you can use to qualify for an SBA loan. The first thing you want to do is ensure that your company can produce and keep up a good cash flow. This is one of the biggest determinations of whether you can qualify for the loan. The lender will see that you are a good risk and that you will be able to make timely payments toward the loan.

You should obtain a copy of your business credit score. You may want to also get one reflecting your personal credit score. If your credit is less than perfect, it’s possible to get SBA loans for bad credit. Generally, lenders will extend a loan to business owners who have at least a 675 credit score. If your credit is bad, you can work on repairing it and increase the odds of getting a good loan with good rates.

While it might be tempting to get quotes from a few lenders, you should refrain from doing that. It could hurt your credit score and cause it to dip by five points. When a hard inquiry is done on your credit report, it can work against you. Find out beforehand whether a lender intends on performing a hard or soft inquiry before getting a quote.

You should maintain positive cash flow on a consistent basis. Although it’s normal for businesses to experience a lull here and there, if this is the case for your company, you should avoid trying to get a loan at that time. Lenders want to see consistency, which means any period of negative balances should be limited. It can hinder your ability to qualify for an SBA loan.

Finally, you will want to find the best lender available. Research a few possibilities and make sure you know what to expect from them. You may want to check reviews each lender has gotten from prior borrowers. During your research, you can gradually limit your choices and find the best one for you.

Applying for an SBA Loan

You may want to first try your own bank when applying for an SBA loan. When you already have a relationship with the institution, it elevates your chances of being approved and getting a reasonable rate.

These steps can help you be smarter about getting the loan you need. Your business will be in better shape for it.

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