New Year’s resolutions are in full swing this year with everyone trying to lose those ten pounds or get their financial house in order. For those of us with an entrepreneurial spirit, what better resolution could there be than diving in and finally taking our small business to the next level? No matter the industry, now is a great time to utilize the resources of the Small Business Administration, and be capitalized for your small business.
For many of us, getting started is often the hardest step. You may have a great business plan, but what if you do not have the cash right now to invest into a business for proper growth. Lucky for you, utilizing the Small Business Administration for a small business loan is easier than ever! Online lenders have made applying for these loans straightforward and painless.
The SBA partners with many traditional lenders to make capital available for small business owners under strict guidelines, so that you can take comfort in knowing the loans are federally regulated. Before applying, it is important to educate yourself with the ins and outs of these loans. The Small Business Administration provides abundant resources for this, and you can review them all here.
The most common type of loan offered by the SBA is the SBA 7(a) loan. It is popular because it can be used for almost any business purpose, with long repayment terms and low interest rates. Depending on your business, you can receive financing up to $5 million to be used for working capital, refinancing debt, or purchasing an existing business, real estate, or equipment. The interest rates carried on these loans vary from 7.5% to 10%.
The qualifications for these loans are also relatively easy to achieve. The applicant need have a 680 credit score, be prepared to commit a 10% to 20% down payment, and have some amount of collateral, although the loan need not be fully collateralized. The SBA, a department of the federal government, has a vested interest in successful small business owners, so the program is straight forward, and there are minimal catches.
Just because the process has been easy however, it would not be prudent to take a loan haphazardly. It is important to have a detailed plan designed for the success of your small business. The first step is understanding your funding needs and how you are going to use the money. You should think critically about the following three questions. Why do you need the money, how much do you need, and what level of debt payments can you afford? Understanding your business needs are critical to not only the loan, but also the long-term success of your business.
The next step is preparing your documentation. The lender that you choose will need to review the loan, and adequate preparation on your part will certainly expedite the process. The following documents are recommended when completing the application:
- Three to twelve months of most recent bank statements
- Two years of most recent tax filings
- Letters of Incorporation from the Secretary of State
- A Current Balance Sheet; and
- A Current Income Statement on the business.
While the process is more straightforward than ever, should you find yourself overwhelmed, Thrift & McLemore’s attorneys are always here to help! We pride ourselves on helping small business clients thrive. Thrift & McLemore counsels many small businesses in many facets of their operation. Contact Thrift & McLemore by email at [email protected] or by phone at 678-784-4150 to discuss your small business needs today!