Jun 7, 2022
As SBA business loans are guaranteed by the federal government, many borrowers think that documents would not be a big issue like in private loans. The verification and other stages of loan processing will not be complicated and approval will be given soon. But, actually, SBA business loans are document-intensive and follow strict verification and processing rules. If the documents (even, if it’s one document) are not right, it will take longer to process as SBA will make sure everything is done by the book.
Submitting documents for SBA business loans is something that requires expert advice, no matter if you are starting the business or it has been years running it. Some documents need to be prepared especially for the loan process. You might not have such documents in your business folders because they aren’t used everywhere. For this, Royale Capital can help you in the best way.
In this post, we will discuss the documents required for the SBA business loan process.
Not always, but mostly a personal background statement is asked to process SBA business loans. The statement includes information like your previous address, names used by you on different documents, your educational background, and criminal records. But, the thing is that the information in the statement should be verifiable through outside sources.
Applying for SBA business loans is not a job interview but still, you need a professional resume. This is important to show lenders your business experience and your knowledge about the industry. Other than this, a professional resume will describe your qualification to run a small business and your preparation to become an SBA loan applicant. This will be a bit different from a regular job interview resume. So, you should draft it carefully.
If you have a business or professional credit report and score, you can present the same. Majorly, personal credit reports and scores are preferred because small businesses typically have very little borrowing history. To secure the amount, the lenders check personal details. Royale Capital will help you get these details from the right platform so that you can check and find out any false information. In case of any error, you can correct it before submitting it.
We already said that a business operating for years in the industry can apply for SBA business loans. But, if the same business has applied for any other loan or has credit, it has to show a business credit report. The personal credit report might not work or be considered a secondary document in the loan processing. Years of business in the industry and its past credits will determine the document types. So, it’s good to be prepared.
Just like a personal credit score, you should look at a personal tax return report. You should check and analyze the tax that you have paid or is to be paid. This will ensure how fiscally responsible you are when applying for SBA business loans. This will give a sense of security to the lender and increase the chance of loan approval. Also, you should provide details for the past two tax years. Sometimes, an extension is needed for tax filings. In this case, you should show proof of an extension mentioning the reason for the extension.
Applying for SBA business loans means you need to provide details about your business structuring. You need to provide one or all legal documents associated with it for further processing. The legal documents can vary between SBA lenders. You don’t have to give original documents but copies of the original documents. This might take time, so prepare beforehand. Some of the legal documents are business licenses and registrations, articles of incorporation, contracts with third parties like clients or suppliers, franchise agreements, and leases for commercial real estate or business equipment.
The documents are not enough for the loan approval so you will be asked to submit a business plan. The business plan should include the details of the future projections for your business. The projections include future sales, cash flow, and profit margin. Apart from this, there should be qualitative goals like the mission, values, and brand promise of your business. A business plan is a strong tool to convince your lender and get approval for the maximum loan amount. Just like your professional resume, you should give time to prepare a business plan.
The lenders are worried about their money, its uses, and your ability to repay it. To confirm and understand it, they ask for the loan usage plan. They want to know if the amount will be invested in the right place or in the right way and if they will get any return out of it. No matter for what reason you are planning to use the loan, you should mention everything in the document. Keep in mind that everything will be verified. Make sure the details match up with your business plan.
You very well know that a balance sheet shows the financial health of the business. It defines the assets and liabilities of the business. These details are very important for the lenders to determine the condition of the business and how secure their loan amount is. The balance sheet should be updated within the last 60 days. Also, you should submit quarterly balance sheets from the last 2years. Make sure you recheck the balance sheet several times before submitting it.
Also known as an income statement or P&L, the profit and loss statement shows the revenue and expenses of the business over time. Just like your balance sheet, the profit and loss statement should be updated within the last 60 days. Sometimes, the P&L statement for the past two years is also asked. This helps the lenders to know the ups and downs of the business and how you have handled them.
If there is income, your business has to pay income tax returns. And this is something that the lender will ask to submit. They will check the bank statements and tax returns for the last two fiscal years and take strict action if they find any disparity between these two documents. So, you should check the documents carefully before submitting them for an SBA business loan application.
Documentation for SBA business loans is complicated. So, contact Royale Capital. We can help.