How to Get an SBA Loan for Your New Startup

How to Get an SBA Loan for Your New Startup

Entrepreneurs often have a difficult time acquiring funding for their startups. One option to consider is an SBA-backed loan. Although you face considerable competition in your application for an SBA loan. You may be able to qualify for and obtain one as long as your business operates in the United States, is for-profit, and meets the SBA’s standards concerning the size. Here are the steps you should take to increase your chances of getting a startup loan from the U.S. Small Business Administration.

Figure Out How Much You Need

The first step in obtaining a startup loan is calculating how much it will cost to set up your business. In this assessment you will need to include the rent for whatever properties you need, employee salaries, purchasing inventory, and buying or leasing equipment.

Create a Business Plan

Having a comprehensive business plan demonstrates to lenders that you have thought your project through, organized it efficiently, and are prepared to guide it to success. Your plan should have an executive summary, a description of your company, an analysis of your industry and target market, an outline of the organizational and management structure, an explanation of the products and services your company offers, and a financial projection for the coming five years.

Select the Best Loan for Your Situation

Find a lender such as a bank or credit union to work with. Then determine which type of SBA loan best meets your company’s needs. For instance, SBA 7(a) loans provide up to $5 million that you can use for real estate, supplies, equipment, or working capital. SBA 504 loans are also for up to $5 million. Specifically used for machinery, real estate, and other major expenses. If you only need up to $50,000 to get started, apply for an SBA microloan. These are easier to obtain and you may qualify even with limited income and poor credit. If you are starting up your business in an underserved community, you may be able to borrow up to $250,000 through an SBA Community Advantage loan.

Apply for Your Loan

Once you have decided on the type of loan you need, submit your application. You will need documentation such as tax returns, projections of cash flow, contracts, and a list of available collateral. If you have already started your business, you will also need financial documents from your company.

For more advice on obtaining startup loans from the SBA, contact Gipson Commercial Solutions.