SBA Loans: Qualifying and Applying

By: Cameron Brown

In this first segment of this two-part article
we will discuss some of the general requirements and application
procedures involved in acquiring an SBA loan.

According to
federal government research, small businesses provide about 75%
of the net new jobs added to America''s economy. They also employ
fully one-half of America''s private sector workforce. 99.7% of
all employers in the U.S. are small business owners. These
statistics make a strong case for the existence of a federal
organization dedicated to the promotion and proliferation of
small businesses in this country.

In 1953 the United
States government established the Small Business Administration
(SBA) as a way of assisting entrepreneurs in forming successful
small businesses through government guaranteed loans. While the
SBA does make many small-business loans itself, its primary
function is to guarantee the small-business loans made by
private lenders.

Most SBA loans are secured through any
one of the SBA''s many licensed partners nationwide. Besides
establishing lending guidelines for their partners, the SBA also
ensures reasonable loan terms by guaranteeing major portions of
the loan in the event of a borrower default. Because of the
decreased liability provided by the SBA, the lender is able to
offer better interest rates and options to businesses in the
early stages of development.

Before we get too excited
about the potential benefits of SBA loans, it may be a good idea
to first talk about who can potentially qualify. The size of
your company obviously plays a large role in securing an SBA
loan; after all, this is about ''small business''.

If you
run a manufacturing company, its possible to have up to 1,500
employees working for you and still qualify for an SBA loan. On
the other hand, depending on the type of manufacturing you do,
it may be more likely that you''ll be limited to 500 employees in
order to qualify for loan consideration.

For some
industries, the SBA lender may look at your company''s average
revenue. For example, if you run a wholesale or retail business,
your average annual sales for the past three years cannot exceed
$6 million to $29 million, depending on the type of business you
own. Construction companies need to fall into the $12 million to
$28.5 million range. Basically, if you make too much, you''re
considered too ''big'' to need an SBA loan. It''s also very
important that you''re running an independently owned for-profit
organization if you are considering SBA loans.

If you
still qualify keep reading.

When beginning the SBA loan
application process, your lender will require you to have some
specific information ready. The first document you''ll need is
your business profile; this simply describes the type of
business you run, your annual sales revenue, the number of
people you currently employ, and how long you''ve been in
business. You will also need to provide a loan request. This is
a description of how money you need and how you plan to spend
it. As with any loan, you will need to provide collateral. Be
prepared to explain how you plan to secure the loan.

The
most important information you will need to provide is the
business''s financial statements for the past three years. These
include: balance statement, income statement, and the statement
of cash flows. As the owner of the business, you will need to
provide not only your personal financial statements, but also
the financial statements of any other individuals that hold 20%
or more equity in the company. Most lenders will also ask for
personal tax returns for the last three years.

In the
next portion of this article, ''SBA Loans: Options, Benefits, and
Lenders' we will further examine what kinds of loan options are
available, and for what kinds of businesses they are most
advantageous. Lastly, we will discuss different types of SBA
lenders.

Cameron Brown:
About the Author
Cameron Brown is a client account
specialist with 10x
Marketing - More Visitors. More Buyers. More Revenue. For
information on SBA Loans,
visit Security National
Capital