Steps to Getting an SBA Loan

SBA loans are among the most desirable types of small business loans because of their favorable terms. Here are the four things you need to do to apply.

If you are looking for low-cost financing for your business, an SBA loan should be on your list. They’re among the most desirable types of small business loans because of their favorable terms. Guaranteed by the federal government, they carry less risk for the banks and other financial institutions that make them. And less risk translates to lower interest rates for borrowers.

But navigating the world of SBA loans can be confusing. So here’s a simplified guide that can help make them a little less intimidating.

There are several different SBA loan programs, including microloans and 504 loans. We’ll focus on the most popular one: the 7(a) loan program. Here are four things you need to do to apply for one of these loans.

Check Your Credit

When you apply for a 7(a) loan for $350,000 or less, the lender will pre-screen your application and obtain your business’ FICO SBSS score. A FICO score developed specifically to evaluate small business applications, it takes into account the personal credit of any principal who owns 20% or more of the business, as well information in the business credit report of the business itself.

The highest FICO SBSS score you can earn is 300, and to pass the pre-screen a score of 140 or higher is required. Most lenders want to see a score of 160 or above. A lower score can trigger a manual review, which is more cumbersome.

Make Sure You Are Eligible

There are some basic requirements that you—and any other owners with a 20% or greater ownership in the business—must meet in order to be eligible for an SBA loan.

  • You must operate (or plan to operate) a for-profit small business in the U.S or its territories.
  • You should have “skin the game.” By that, we mean lenders will want to see you have personally invested a reasonable amount in your business and tapped personal resources, if available.
  • The government doesn’t want to fund a business that hasn’t paid it back. In other words, you can’t be delinquent on other debts owed to the federal government such as federal taxes or federally guaranteed student loans. You also cannot have previously caused the federal government to incur a loss on a debt.
  • Your business can’t be in an industry that is not eligible for these types of loans, such as gambling or pyramid schemes. You can see a list of excluded industries here. (Tip: Check that your SIC and/or NAICS code reported on your business credit reports is accurate. These codes categorize your business by industry.)
  • You won’t be eligible if you are currently incarcerated, on parole, on probation or a defendant in a criminal proceeding.

Prepare Your Paperwork

Here comes the fun part: gathering and preparing the documentation many lenders will want to review when you apply for your loan. The SBA lists the loan document requirements on its website, but here is a summary:

  • SBA Loan Application
  • Personal Background and Financial Statement
  • Business Financial Statements (Profit & Loss, 1-year projected financial statement)
  • Ownership & Affiliations
  • Business Certificate/License
  • Loan Application History
  • Income Tax Returns (3 years, personal and business)
  • Resumes for each principal of the business
  • Business Overview & History, including an explanation of how the loan will help the business
  • Business Lease (if applicable)
  • Purchase Information (if purchasing a business, additional information is required)

Find A Lender and Apply

You don’t apply for one of these loans through the SBA directly. Instead you’ll apply through a lender, such as a bank or credit union. Each financial institution will have its own requirements and preferences. Some will work with borrowers in specific geographic areas or certain industries, for example. There are services that help match borrowers to lenders, which can help save the business owner time and money.

Keep in mind that in many cases it takes one to three months to get your SBA loan processed and approved. The Express Loan program shortens that time frame, and some service providers that match borrowers to lenders also help shorten the time frame it takes to get approved and funded.


Note from Viking Equipment Finance – some of the links within the original article at lead to listings for “alternative lenders”.  If your company is considering a business loan with an alternative lender make sure you demand full disclosure of the interest rate, fees and any other costs associated with a loan for your own protection.