There is no denying that the coronavirus pandemic has put us through tough financial times. Small businesses have not been spared either, with a majority being forced to cut costs, revise sale projections, and seek loans to help stay afloat. Fortunately, the SBA has a separate Covid-19 disaster package to help you stay afloat.
Here is all you need to know about an SBA loan application:
Once you have decided to apply for an SBA loan, ensure you have all the required documents. Use the checklist below to ensure you have everything the lender is likely to ask for;-
- Complete and SBA loan application form
- Personal background (SBA form 912) and financial statement (SBA form 413)
- Business financial statements, including profit and loss statement, plus projected financial statements
- Ownerships and Affiliations – Include a list of their names and addresses
- Business certificate/ license
- Loan application history
- Income tax returns
- Personal resumes for each principal
- Business overview and history
- Business lease
If you are seeking to purchase an existing business, you will need to provide the following information about the company;-
- Current balance sheet, plus profit and loss statement
- Previous two years federal income tax returns
- Proposed terms of sale
- Asking price, including a schedule of inventory, machinery, furniture, equipment, and fixtures
Possible Reasons for Rejection
A possible and unfortunate response to an SBA loan application is that you are eligible. Though the criteria have changed to encourage more businesses to apply, your application rejection’s typical reasons do not change. Work yourself through the following list to discover what sticks out as your weak point;-
- Brand new business
- Low Credit Score
- Lack of Adequate Collateral
- Poor Cash Flow
- Risky Industry
- Incomplete Application or Missing Documents
- High or low debt utilization
- Asking for too little
- Failure to prove that your business is directly affected by the current disaster
After a rejection, try and figure out the reason behind the decision. Once you have an idea, you can choose to:
Appeal Your Denied Loan Application
If you feel your application was denied for uncalled for reasons, you have six months to submit an appeal to the SBA Disaster Assistance Processing and Disbursement Center (DAPDC). Take this opportunity to present your updated business and financial documents, plus any supporting information you feel may help with your case.
Verify Your Lender Requirements
Though you may have done this during your initial loan application, it does not hurt to check again and discover anything you may have missed.
Update Your Loan Application
Once the opportunity arises to submit your application once again, gather and update all required documents, focusing on the potential reason was rejected in the first place.
If you would instead not reapply, you can decide to find an alternative lender, such as a factoring company or fintech agency. Additionally, you can choose to explore other funding options, including Intuit, PayPal Working Capital, Fundbox, and Behalf.
Disasters are often unpredicted, dire financial harm to businesses of all sizes. Luckily, the state has a package set aside for small businesses, with less stringent criteria and a streamlined application process to help your business stay afloat.