How to Apply for a Government Small Business Loan

The Small Business Administration (SBA) has many small business loan programs that can help you get your business off the ground. The SBA does not actually lend the money directly. Instead, it works through SBA-approved lenders to administer its loan programs. Working with an SBA lender will help you sift through the paperwork and the details of the loan application process.

Instructions

1. Calculate all of your business expenses. Figure out how much it is going to cost you in business registrations, location rental, inventory stocking, employee salaries and benefits, taxes and other necessary business expenses over the life of the loan you plan to take out. Include the cost of taking out the loan in your projections as well as payments, interest and any fees the lender tacks on to the loan.

2. Develop a business plan, incorporating your previous business expense calculations. It should include detailed cash flow projections and request enough money to get your business up and running. Account for every dollar you ask for in your plan and show, in detail, how you are going to repay that loan. Use the resources at SBA.gov from the Small Business Administration to help you write a thorough business plan. Include a plan of what you will do if you cannot repay the loan and descriptions of key managers and their qualifications. Demonstrate to the lender that you know the market for your type of business.

3. Read through and study your business plan closely. Your lender will ask plenty of questions about your business's future and where you want to take it. Know what is inside your business plan like the back of your hand.

4. Work with a Certified SBA Lender or a Preferred Lender. These lenders know the small business loan process and can help you apply for the right loan program through the SBA. Find SBA lenders in your area by visiting your local SBA small business development center or one of its regional offices. Find a list of the SBA local offices on its website.

5. Fill out the paperwork carefully. Your lender will provide you with necessary forms and the application. You will need to provide some supplementary documentation as well. Complete as many blanks on the forms and application as you can and call the potential lender to ask for help if you need it.

6. Review your application packet carefully before you submit it to the lender and be sure you included business as well as personal financial statements (for owners, stockholders, officers and partners), a business profile (sales figures, number of employees, description of what you do) and a description of the collateral you will use to secure the loan.

Tips & Warnings

• Visit your closest SBA office or Small Business Development Center to ask about free classes on starting your business. Some SBDCs offer computer Internet research stations to help you plan your business.

• SBA applications include several other documents including your personal and business income tax returns over the last three years, personal resumes for principal persons of the business, a description of how the SBA loan will help your business and a copy of the lease (or a note from your potential future landlord describing the terms of a possible lease). The SBA's Small Business Forms Financial Assistance web page contains a list of the documents you will need.

References

• Business.gov: Need a Small Business Loan? Tips for Researching Lenders and Preparing a Winning Loan Proposal
• Business.gov: Tips for Getting Your Small Business Loan Request Approved (Even in Today's Economy)
• SBA: Finance Start-Up-Basic Requirements
• SBA: Check List of Required Papers to be Obtained from Applicants SBA/Bank Financing

Resources

• SBA: Local Resources
• SBA: Finance Start-Up