{"id":63256,"date":"2022-12-01T21:36:00","date_gmt":"2022-12-01T21:36:00","guid":{"rendered":"https:\/\/businessyield.com\/?p=63256"},"modified":"2023-01-19T09:51:14","modified_gmt":"2023-01-19T09:51:14","slug":"small-business-loan","status":"publish","type":"post","link":"https:\/\/businessyield.com\/bs-business\/small-business-loan\/","title":{"rendered":"SMALL BUSINESS LOAN: How to Get a Small Business Loan","gt_translate_keys":[{"key":"rendered","format":"text"}]},"content":{"rendered":"

If you need money from a bank or the SBA, you need to know how to write a loan request letter. This is because your business loan request letter will be a key part of how your bank’s underwriter evaluates your loan application. A quick business loan does come with certain disadvantages, such as short repayment terms and high-interest rates. There are some factors you need to consider while getting a small business loan. However, this article will guide you on how to get a small business loan, including when you’ll need one, what you’ll need before writing a loan request letter, an example of the format, and the template to use.<\/p>\n

What Is a Small Business Loan?<\/span><\/h2>\n

A small business loan provides you with capital<\/a> to invest in your company. The money could be put to use in a variety of ways, such as providing working capital, financing improvements like upgrades in infrastructure or personnel, or financing business or property acquisitions. A bank considers many factors when determining whether you are eligible for a loan and how much debt your business can afford, including the condition of your business, available collateral, cash flow, and character. The requirements and terms vary depending on the type of loan product you are applying for, so make sure your lender describes what they will need from you to qualify.<\/p>\n

What Are The Minimum Requirements For an SBA Loan?<\/span><\/h3>\n

The Small Business Administration has certain criteria that applicants must fulfill before receiving funding:<\/p>\n

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  • You must be legally operating and officially registered as a for-profit business.<\/li>\n
  • As a business owner, you can’t be out on parole.<\/li>\n
  • Your company must have fewer than 500 employees and annual revenue of less than $7.5 million over the last three years.<\/li>\n
  • Your net income (after taxes and excluding carry-over losses) must be less than $5 million, and your tangible net worth must be less than $15 million.<\/li>\n
  • You must demonstrate that you have “invested equity” by putting your own time and money into the business.<\/li>\n
  • If you want to do business in the United States, you need to have a physical presence and target customers in the United States and its territories.<\/li>\n
  • To receive SBA funding, your small business must operate legally and ethically within a specific set of guidelines. Learn more about the industries that are eligible and ineligible for SBA 7(a) loans.<\/li>\n
  • You must demonstrate that you have tried and failed to obtain funds from other financial lenders, completely exhausting non-SBA loan options.<\/li>\n
  • prove that you have a good business reason for requesting the loan and that your intended use of the funds is approved by the SBA.<\/li>\n
  • You must be current on all federal debts (taxes, student loans).<\/li>\n<\/ul>\n

    How to Obtain a Small Business Loan<\/span><\/h3>\n

    Take the following steps to increase your chances of being approved for an SBA loan:<\/p>\n

    #1. Build Your Credit<\/span><\/h4>\n

    Most SBA loans do not require a minimum credit score, but rather “acceptable” credit. In a moment, we’ll go over the credit score requirements for SBA loans.<\/p>\n

    If your personal or business credit scores can be improved, you should work on them. For example, you could open a couple of business credit cards and then pay your balance on time, if not in full, every month to begin building a credit history. Take the time to go over your business credit reports and correct any errors or problems.<\/p>\n

    #2. Design a Business Plan<\/span><\/h4>\n

    An SBA loan may not require a business plan. Not all loans or lenders require them. Some, however, will. Even if they don’t, the information in your business plan can give you and the lender the proof you need to show you can pay back the loan. If you don’t have one, you can get free business plan assistance from your local SBDC or a SCORE mentor.<\/p>\n

     #3. Collateral Documentation<\/span><\/h4>\n

    You cannot be denied an SBA loan simply because you lack collateral. However, most SBA loans require you to put up collateral, such as real estate or equipment, if you have it. Find out ahead of time the market value of any assets you intend to use as collateral for the loan.<\/p>\n

    Keep in mind that a personal guarantee is typically needed for SBA loans. That means you will be personally liable to repay the debt if the company fails to do so.<\/p>\n