How to apply for an SBA loan: requirements explained

1. An SBA-approved lender

The SBA doesn’t issue financing to small businesses directly, so you’ll need to find a lender who participates in the program to provide capital. The most reputable and experienced SBA lenders are given a Preferred Lender status (PLP). While the SBA sets minimum requirements for program eligibility, lenders can add additional requirements according to their internal policies. Make sure to understand everything the lender will need to consider your SBA loan application.

2. Purpose of the loan

Clearly articulate why you need the loan and how you plan to use the funds. Whether it’s to build, acquire or improve commercial real estate, buy out a partner or buy into an existing business, replace aging equipment or recapitalize by refinancing debt, the purpose should align with the SBA loan program you are applying for.

3. Business plan

A comprehensive business plan is essential for an SBA loan application. This plan helps the lender understand your business model and assess the potential for success. It should include an executive summary, market analysis, organizational structure, product or service line, marketing strategies and financial projections.

4. Resume and background information

Lenders often request the resumes of business owners and key management personnel to understand your business experience and management capabilities. For most SBA programs, any owner with a 20% or more interest in your business will need to guarantee the loan, so they should be prepared to provide documentation to the lender.

5. Personal and business tax returns and financial statements

Expect to submit your personal and business tax returns for the past two to three years, along with current personal and business financial statements. These documents give the lender a historical view of your financial performance and ensure that your income is accurately reported. Your business financial statements, including balance sheets, income statements and account aging reports, can come from your internal accounting software or be prepared by a financial advisor. Be sure to discuss any irregularities, atypical expenditures or changes in accounting methods with the lender.

6. Business debt schedule

If your business has existing term or revolving credit facilities, you’ll need to provide a schedule that outlines these obligations. This includes information on the lenders, original loan amounts, remaining balances, interest rates and monthly payments. Lenders use this to evaluate your debt-to-income ratio and ability to repay the additional debt being requested.

7. Personal and business credit reports

Lenders will evaluate both your personal and business credit history. A strong credit history can significantly increase your chances of approval when you apply for an SBA loan. Lenders will also consider derogatory items on your report, such as late payments, bankruptcies, collections, tax liens and judgments. If any of these are found, be prepared to provide the lender with an explanation and any supporting documentation.

8. Legal documents

Various legal documents are required to verify your business’s legitimacy. These may include your business license, articles of incorporation, bylaws, operating agreements and any franchise agreements. Ensure all documents are up-to-date and accurately reflect your business structure.

9. SBA loan application form

You’ll need to complete certain SBA-required forms, such as SBA Form 1919. This form collects detailed information about your business, its owners and the loan purpose. It’s crucial to fill it out accurately and thoroughly.

10. Collateral

SBA loans have different collateral requirements based on the loan size, purpose and the program used. In some cases, collateral may not be required at all. Be prepared to provide a detailed list of assets you can use as collateral. Collateral can include commercial or personal real estate, equipment or other business assets that can be liquidated in case of loan default.

Applying for an SBA loan requires you to be prepared and provide your details. By gathering the necessary documents, maintaining strong credit history and clearly presenting your business case, you can successfully apply for an SBA loan and improve your chances of securing the funding needed to grow your business.

SBA loan resources

• SBA loans overview
• Business ownership and expansion
• U.S. Small Business Administration
• SBA Learning Platform