Applying for an SBA loan without collateral – tips for my SBA loan application?

A reader recently reached with a great question:

I’m looking for some advice on how to present my start-up idea, business plan and myself as a potential SBA candidate. I’m working on my business plan right now for a small spa. I have someone helping me with a business plan and I have lots of management experience in the industry. But I don’t have any collateral. I have a great personal credit score and I’m working on obtaining at least a 20% down payment. Are there any other ways I can improve my chances on being approved?

Here were my thoughts:
If you’re borrowing less than $350K, the lack of collateral may not be too big of a deal.
If you’re borrowing more than $350K, it is more likely to give lenders pause.

Here are a few things SBA lenders prefer to see in business plans and financial projections that might not be totally obvious:
1. Be conservative: lenders want to see realistic numbers – customer growth, recurring customers, revenues, etc.
2. Plan for delays: any renovations, any marketing efforts, etc. – plan for 10% delays, cost over runs, lower returns.
3. Have a plan for your personal living expenses and other obligations that are independent from business profitability for the first few years if possible.

Other funding that can be an option:
1. Rollover for Business Startups (ROBS).
This is a way to use retirement money for your business without paying early withdrawal penalties or taxes. You’re basically investing in your own business. Read the article from the link above for full details.
2. Consider putting off non-essential equipment purchases until after you’re generating revenues for 6+ months. Equipment financing usually becomes pretty affordable once you can show you’re generating income (so long as the rest of your finances stay strong).