Applying for an SBA 7a loan can be difficult, but there are 4 basic steps you can follow that will help any SBA loan application. We’ll show you how to apply for an SBA loan by determining your eligibility, finding the right SBA loan provider, gathering your documentation, and submitting your SBA loan application.
For the fastest, most streamlined SBA loan process, we recommend SmartBiz. They offer SBA working capital loans up to $350K and commercial real estate loans up to $5MM. Loans have terms of 10 or 25 years and rates start at 5.75%. Their online application can have you prequalified in a few minutes and funded in weeks.
Here are the 4 steps you’ll typically need to take when applying for an SBA loan:
1. Determine Eligibility
The first step when learning how to apply for an SBA loan is to determine whether or not your business is eligible. There’s no sense in wasting time on a lengthy application process if you don’t meet the minimum requirements. You’ll typically need to meet both general SBA borrower requirements and certain eligibility requirements for the SBA program.
SBA Loan Borrower Requirements:
- Credit Score: 680+ for all primary business owners (Check your score for free here).
- Down Payment: 10% or more if you’re using the loan proceeds to purchase a business or commercial real estate.
- Collateral: SBA loans don’t need to be 100% collateralized, but the more business and/or personal collateral you bring to the table the easier it will be to get your loan approved.
- Time in Business: 2+ Years. Startups can get SBA 7a loans, but it is more difficult. If you want to try for an SBA loan as a startup, you’ll need to have all of the above plus business management & industry experience. Click here for SBA startup loan details.
- Owner-Occupied: Commercial real estate loans must be 51%+ owner-occupied.
- Other Requirements: No delinquencies or defaults on debt obligations to the U.S. government (including student loans).
Additionally, your business will need to be profitable.
SBA 7a Loan Program Requirements:
- Be a small business as defined by the SBA (generally means under 500 employees or less than $7.5 million in annual sales).
- Be engaged in an industry that is eligible. (Most non-vice, non-speculative business qualify.)
- Be a for-profit business engaged in, or planning to do business in, the United States or its possessions.
- Use alternative financial resources, including personal assets, before seeking financial assistance
- Be able to demonstrate a need for the loan that also qualifies as a sound business purpose
- You are required to create or retain jobs and meet public policy goals that are in line with the SBA goals.
Sound like you? If you’re ready to get prequalified for an SBA loan, fill out SmartBiz’s online form. They can preqaulify you in minutes and facilitate the fastest SBA loans we’ve seen. In fact, they’re who Fit Small Business used to get an SBA loan! SmartBiz offers SBA working capital loans up to $350K and commercial real estate loans up to $5MM. Loans have terms of 10 or 25 years. Get pre-qualified now.
2. Find an SBA Loan Provider
If you meet the requirements above, the next step when applying for an SBA loan is to find a provider that will originate and service your loan. Our recommended SBA loan provider is SmartBiz because they’re fast, efficient, and can improve your chances of getting funded. Their streamlined process can get you pre-qualified in minutes and funded as quick as 30 days.
Finding an SBA loan provider means reaching out to direct lenders like banks and brokers. The right one for you will depend on your current banking relationship, how much you’re looking to borrow, how fast you need funds, and what you plan on using the funds for. Let’s take a look at each one in greater detail.
Find a Direct SBA Lender
In general, it’s a good idea to find a direct lender that regularly works with SBA loans. These providers are more likely to approve your loan application and typically know how to deal with any unique circumstances you may have because of their experience. Direct lenders can include traditional banks, credit unions, or other traditional lending institutions.
Make sure the lender is part of the SBA Preferred Lender Program (an SBA PLP lender). PLP lenders are SBA loan providers that have so much experience and such a strong track record that the SBA actually gives them more leeway to process loans faster.
As you visit potential lenders, we recommend asking them the following questions:
- What is your total SBA loan volume?
- What’s your average SBA loan size?
- Do you participate in the SBA Preferred Lender Program?
- How familiar are you with the SBA 7a borrowing/lending processes?
- How long does it take to get pre-approved?
- How long will it take to get funded?
- Is there one person who will be my point of contact throughout the loan application process in case I have any questions?
- What are your internal policies on collateral for a loan like mine?
- Will I need a down payment? If so how much?
- What are the approximate interest rates I might qualify for?
If the lender you speak with isn’t sure about their bank’s SBA loan performance, you can browse through the SBA’s list of the 100 top SBA lenders. These lenders are more experienced with SBA loans than anyone else and should be able to answer your questions.
Use a Broker to Get an SBA Loan
SBA loan brokers can provide a valuable service to small business owners by leveraging their expertise. Brokers often have a keen understanding regarding which lenders will be most likely to approve your loan for your type of business as well as how to present your business’s loan request so it has a better chance of approval.
Additionally, SBA loan brokers can save you a lot of time and headaches by coordinating all the lender’s document requests and other communications. However, not all small business loan brokers are created equal. Here are a few questions you should ask a potential loan broker:
- How many lenders do you work with directly?
- How do you get paid? How much? When?
- How many loans have you closed?
- Have you previously worked with a business of my size or in my industry?
- How familiar are you with the SBA 7a loan process?
- What are the approximate interest rates I might qualify for?
- How long does it take to get pre-approved?
- How long will it take to get funded?
- How much of the process do you handle for me?
Using a broker to manage your SBA loan process will typically cost you a little extra money, but the right broker can make the process a lot smoother. Their ability to shop your loan proposal with multiple SBA loan providers may also improve your chances of approval.
When you find a lender, either directly or through a loan broker, you should try to find out as much information about their SBA interest rates and fees as possible. The SBA sets a cap on interest rates, but exact rates may vary by lender.
SmartBiz is an SBA loan broker who is experienced at getting borrowers through the application process quickly. They can help you get funded for up to $5 million in as quick as 30 days. You can prequalify by filling out their online application.
3. Assemble and Organize Your SBA Loan Paperwork
Once you have selected an SBA lender or loan broker, you should begin to assemble the documents required for your application. You can download our comprehensive SBA loan document checklist for more information.
The main documents required by a direct lender or loan broker include:
- Loan Request Amount & Detailed Allocation of Funds
- Business Financials
- YTD Profit and Loss (P&L) Statement
- YTD Balance Sheet
- Projected Financials (1-3 years)
- Proof of Ownership
- Business Certificate/License
- Loan Application History
- Business Tax Returns (last 2 years)
- Personal Tax Returns (last 2 years)
- Personal Financial Statement
- Owner Résumés
- Business Overview and History
- Business Lease
If you are getting an SBA loan to buy an existing business, you will also need the following:
- Acquisition’s YTD balance sheet and P&L statement
- Acquisitions last two years of business tax returns
- Purchase Agreement (should include asking price with a schedule of inventory, machinery & equipment, furniture & fixtures, accounts receivable, and intangible assets).
If you are getting an SBA loan to buy commercial real estate, you will need to provide these documents:
- Real Estate Purchase Agreement
- Rent Rolls and Leases for any Tenants of Your Property
- Property Appraisals (which will be ordered by the lender prior to closing)
- Any Plans for Remodeling or Build Outs (including timelines and costs)
If you have a 20%+ stake in any other business or own rental properties, you will also need to provide documentation for those as well (such as financials, appraisals, leases, or rent rolls).
“If you are a startup, it is important to provide a pro forma and cash flow projection that shows viability” according to Andrea Roebker, Regional Communications Director for the SBA. “You will also be required to provide a solid business plan, which is vital to your application being approved.”
The overall goal is to show a bank that your company is well managed and has an attainable plan to be profitable. So make sure you take the time to prepare a great business plan. This includes projections of how you expect the business to perform in the next 3 – 5 years.
Much of the speed of your application process will depend on your ability to provide timely & accurate documentation to your loan officer or lender. Download our free SBA loan document checklist to make sure you collect all of the information you need to streamline your loan process.
4. Complete SBA Loan Application and SBA Forms
SBA loan applications vary by lender, but they typically all request basic information about your business and the purpose of your loan request. According to the SBA, this information should include:
- Executive Summary
- Business Profile
- Ownership Breakdown
- Management Experience
- Breakdown of How Funds Will Be Used
- Statement of How Loan Will Be Repaid
This application will be combined with all of the other required information listed above in step 3 when you submit your documentation. Additionally, you’ll need to fill out other SBA forms depending on your personal or business situation.
As part of your application, you will need to fill out some SBA forms before your loan can be approved. The forms you need to fill out depend completely on you and your business.
Here are comprehensive guides on the most used SBA forms and how to complete them:
- SBA Form 1919 Guide: Borrower Information Form – Used for all 7a loans, this form is where you note down basic borrower information. The previous version, Form 4, is no longer in use.
- SBA Form 912 Guide: Statement of Personal History – This form is used to evaluate your character.
- SBA Form 413 Guide: Personal Financial Statement – This form is used to assess the personal financial standing of you, your spouse (applicable), and anyone who is a proprietor of the business.
- SBA Form 159 Guide: Fee Disclosure Form and Compensation Agreement – This form is only necessary if you hired someone to help you with your SBA loan application. It details how much you paid them and the services they provided
Once you have completed all of your SBA forms and assembled your supporting paperwork, you will meet with your bank to finalize your loan application. This is where the process is taken out of your hands, and you’ll have to rely on your lender to push the loan forward and close quickly. Having an experienced SBA loan provider is invaluable if you need the funds fast.
SmartBiz is the fastest SBA loan provider we’ve reviewed. They offer SBA working capital loans up to $350K and commercial real estate loans up to $5MM. Their streamlined, online application can have you prequalified in a few minutes and funded within 30 days. You may qualify if you’ve been in business for 2+ years and have a credit score above 680.
Sample SBA Loan Application
Every SBA lender is going to have different paperwork that you’ll be required to fill out in addition to the SBA’s paperwork. Your application will vary in length, but the overall SBA lender application will look something like this:
Additionally, you’ll be asked to fill out SBA Form 1919 to provide the SBA with basic information about yourself. We’ve written a great article all about SBA Form 1919, which you can reference to better understand it or where you can download the actual form.
SBA Loan Application for Commercial Real Estate
When applying for an SBA loan for commercial real estate, you’ll typically have 2 options:
Regardless of which loan you choose, the eligibility requirements, forms, and required documentation are almost identical to the working capital SBA 7a loan requirements. However, applying for a commercial real estate loan that is guaranteed by the SBA is a little more complicated and time consuming than a normal 7a loan that we discussed above.
In addition to everything required for a general SBA 7a loan you’ll need to include the following:
Rent Rolls for All Tenants
Commercial real estate typically has at least one tenant that pays rent, even if the only tenant is your business. You’ll need to provide rent rolls for all tenants involved with the property being purchased or used as collateral.
A property appraisal will be ordered by the loan provider after your application is initially approved. You’ll typically pay for this appraisal. The amount your property appraises for may change how much you pay down or your maximum borrowing limit.
A study showing any potential environmental issues around your property will be ordered by the loan provider after your application is approved. If any red flags show up then a more in-depth study may need to be ordered before your property is approved by the loan provider.
List of Ongoing Maintenance Expenses
You’ll also need to provide a breakdown of costs that must be spent on an ongoing basis to upkeep the property. The loan provider will likely want to make sure you have the cash to handle these costs, even if you plan to pass much of it on to other tenants.
Report on the Condition of Property
Many lenders will require a report on the condition of your property to see what deferred maintenance items are coming up in the near future. The loan provider will typically want to be comfortable that you have the cash to make any standard facility upgrades or overdue maintenance.
Current Leases on the Property
To get an SBA loan for your property it must be 51%+ owner occupied. If you are renting any portion of the property then the loan provider will want to see all existing leases. They will also want to see any terms you and your tenants have agreed to that will go into effect after closing.
Note: If you’re not going to occupy more than 51% of the property, you may want to consider a traditional commercial real estate loan.
SBA Loan Applications for Startups
Many startups find SBA loans an attractive alternative to taking on high-interest rate debt like using their credit cards. In 2017 39% of all SBA loans originated went to startups, and they received 36% of the total money. While existing businesses tend to receive almost twice the amount of SBA loans as startups, they’re still an excellent option for new businesses.
The application process for a startup is virtually the same as it is for an experienced business. The only differences are the following:
- You may need to pledge additional personal collateral to get approved for your loan.
- The SBA likes to see that you have invested a portion of your own liquid savings into the business (usually 20-30% of the loan amount).
- You must have prior management experience in the industry to show that you can make the startup a success.
- Your approval chances increase if your business or industry is considered to be underserved.
Two SBA loan programs that are more startup-friendly are the Community Advantage Program and the Microloan Program. You can read our article to learn more about the various types of SBA loans. If you don’t think your business will qualify for an SBA loan, there are plenty of other startup loan options that might be available to you.
If you’re looking for an SBA startup loan, we recommend working with Guidant Financial. They are startup funding experts and can help entrepreneurs prepare an SBA loan package and identify an SBA lender who is most likely to fund your loan. They can also help borrowers find creative ways (including using retirement savings without paying penalties or taxes) to come up with the 20-30% down payment often required by SBA lenders. Fill out this short form to get a free SBA startup loan consultation with Guidant.
5 Stages of an SBA Loan Timeline
The SBA loan timeline will depend on how familiar your SBA lender is with the type of SBA loan you want and how prepared you are with the required documentation. If you apply for an SBA loan online with someone like SmartBiz, you’ll likely experience SBA funding times under 30 days. Getting an SBA loan from traditional SBA lenders typically takes 2-3 months.
You’ll typically go through the following 5 stages when getting an SBA loan:
1. Prepare & Apply
First and foremost, you should prepare by following the 4 steps above. By the end of the 4 steps, you’ve hopefully applied and have likely increased your chances at pre-qualifying for an SBA loan.
2. Letter of Intent
Once you have submitted a full application you can usually expect to hear back within 1-2 weeks. If your lender wants to move forward with the loan they will provide you with an initial proposal called a Letter of Intent (LOI). The LOI will outline how much you qualify for and what you may expect as far as loan terms and rates.
If you find the rates and terms agreeable you will need to return a signed copy of the LOI to lender pretty quickly. Most lenders will also require a small deposit, usually around $2,000 (refundable, minus 3rd party fees, if the loan isn’t funded), in order to move forward with underwriting the loan.
After submitting a signed LOI and deposit, formal underwriting will take place. Underwriting for an SBA loan can typically take 2-3 weeks. During that time the underwriting team may have further questions about your financials, your plans for the loan proceeds, or they may request other relevant documentation.
4. Commitment Letter
If underwriting is successful, your lender will give you a commitment letter outlining the terms of your loan and what steps remain before you can close. Accepting the commitment letter typically requires you to put down an additional deposit to show the bank you’re ready to move towards closing.
This deposit is typically $5,000 or 5% of the loan and counts towards your down payment. It’s also refundable (minus 3rd party expenses) if the loan is not funded.
During closing, loan terms are finalized. The amount of time it takes to close the loan is determined by the complexity of your deal, your lender’s familiarity with SBA loans, and the length third-party work (like appraisals and environmental reviews). Eventually, you’ll sign the loan agreement, all closing costs and SBA guarantee fees will be paid, and the loan proceeds will be disbursed.
The general application process for financing through a bank can be time consuming, and involve a lot of paperwork. Providing documentation and dealing with phone calls from multiple lenders can take up most of your time.
Bottom Line – How to Apply for an SBA Loan
Learning how to apply for an SBA loan can be a complicated process. It can take a significant amount of time away from running the day-to-day operations of your business, even if you’re pursuing an SBA express loan. To speed up the process and make sure you apply correctly, partner with a loan provider that is well versed in SBA lending.
SmartBiz can make getting an SBA loan much easier for you by dealing with most of the paperwork on your behalf. They can also get you funded with an SBA loan faster than anyone else we’ve reviewed, funding in as quick as 30 days after you lean how to apply for an SBA loan. You can qualify for up to $5 million by filling out an online application that only takes a few minutes.