How To Apply For A Start-up Business Loan
Are you planning to start a new business and looking to get financial assistance? Have you heard of the SBA MicroLoan program but don’t know if you are eligible for the loan? Are you confused about which type of loan would be suitable for your start-up?
Applying for a loan can be a herculean job, but you can fill and collate all the documents required to apply for a loan with the proper guidance.
Let us guide you through what is expected of you if you plan to apply for SBA Microloans. These loans are the most popular amongst the new start-up companies. Due to the lower interest rate and flexible payment option, the microloan program is the most availed loan amongst other financial loans offered by banks.
How does a start-up business apply for SBA MicroLoan?
The federal government designed SBA MicroLoan to help small-scale businesses sail through the rough market and sustain themselves.
Which business can apply for a microloan?
- Restaurants
- Beauty parlors
- Childcare centers
- Confectionaries
- New start-ups
- Non-profit organizations
- Retired army personnel
- Small scale business with less than 500 employees
- Business with less than 7.5 million turnover per annum
To apply for an SBA MicroLoan, the start-ups have to get in touch with local intermediary lenders, who on behalf of the federal government, scan through your business documents and approve the loan if your business fulfills all the parameters set by the lender.
The process is straightforward but requires a large amount of paperwork, and it is essential to note here that SBA MicroLoans are of small size and the repayment period set is also short. It is best to seek help from an experienced hand such as SBA50k, who can guide you through the whole process.
What documents should start-up companies submit while applying for the loan?
To apply for SBA MicroLoans, a borrower has to submit a set of standard documents, which include:
- Personal Information:
The borrower must submit written information about his/her background. You must include house address, educational qualifications, names of other partners, character certificate (clean criminal records), etc. In short, it should be like a short biography about yourself.
- Resume:
Like a job resume, you must create one that mentions your qualification and how you intend to run your business.
- Personal and Business Credit report:
A credit report should be verified by a reliable agency, as the intermediary lender would cross-check the same with prominent agencies such as Experian or Equifax.
- Tax details:
Along with your credit score, ensure to submit the tax filed so far and attach the proof of income earned.
- Other documents:
You should be prepared to provide the legal documents if necessary or when asked by the intermediary lender. These include:
- Business license details
- Contract details
- All information about the franchise, if any
- Leases or contracts related to the company physical office or equipment’s
- Business plan:
Prepare a solid business plan for your company. The plan should consist of all the information such as projections of finance, future expansion ideas, management details, profit gained, and cash circulation.
- Purpose of loan:
Create a document where you will be explaining your plans and the purpose of the loan in detail. You should also state how you intend to use the loan amount and circulate the cash.
- Statements:
Keep all the bank statements and financial records in place. Record all the transactions made and credits received, with records of profits gained and losses incurred in the past two years.
- Miscellaneous documents:
Be prepared to provide the business income tax details, debt schedule statements, statements of profit and loss in business, collateral guarantee, etc.
What aspects does the Intermediary Lender check to approve your loan?
An intermediary lender checks various aspects before approving your loan. These are:
- Credit history:
A lender checks the borrower’s capacity in re-paying the loan availed. The credit score, if not good, should at least be average. You must maintain a good credit score. If you don’t have a good credit score, make sure you have collateral that is of good value and someone who can guarantee on behalf of you.
- Loan Repaying Capacity:
A lender pays more weightage to the borrower’s ability to pay the loan on time. So, borrowers should ensure that the business statements submitted must project the company’s cash rotation and the profits generated so far.
- Character Certificate:
The borrower must maintain a clean record not only in terms of business transactions but in terms of personal life too. The borrower should not be involved in any fraudulent activities and have no legal cases registered in his/her name.
SBA MicroLoans are the best options when you:
- Need Small Loans: Start-ups looking for a smaller loan amount to buy inventory or furniture should apply for the loan.
- Need funds immediately: In case you require funds to catch up on sudden expenses for which you were not prepared, then SBA loans are an easy alternative that you can avail easily.
- Require long loan period: With SBA Microloan, the borrower can get a loan period of close to six years. This gives the borrower a reasonable amount of time to stabilize the company and establish a strong business.
Take Away Words:
SBA MicroLoans are the best options when you feel a cash crunch and require money to get a breather or include cash rotation in your business. These loans are also suitable for start-ups that struggle to secure a loan, as the company or the business is small in size. Small businesses struggle to get loans from prominent banks, and MicroLoans intend to cater to these small start-ups.
In case you are confused about how to go about applying for a microloan, you can always take the help of SBA50k, who holds strong experience in guiding new businesses in securing the much-required loan for their business without any hassles.
Why wait now?
If you have a great business idea, don’t hold yourself.
Apply for SBA MicroLoan.
Contact us today!!!
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