Mistakes To Avoid When Applying for SBA Loans
Whether you’re looking to expand your current business or get a new one off the ground, you’ll likely find that you need extra funding. Because of its flexibility and the number of loans offered, loans through the SBA are some of the most preferred by small businesses. However, the application process is notoriously slow and requires a tremendous amount of paperwork. Because any misstep can send you back to the beginning of the process or cause the lender to deny you, you want to avoid these mistakes when applying for SBA loans.
1. Know How Much You Want To Borrow
Just because you can ask for the maximum amount of a loan doesn’t mean you should. While it might be exciting to think of all the extra capital you can have in your business, it’s essential to remember that you have to pay it back. The more you borrow, the bigger your payments and fees will be and the harder it will be to get the funding.
Before you meet with the lender, determine what you actually need to meet your growth goals. Be realistic in your goals and ensure you include all potential costs, such as additional retail space you might need, renovation costs and the cost to hire and train new employees.
2. Make a List of Collateral
Lenders want to know that you’re serious about the loan and that they’ll be protected from a total loss if you don’t pay the money back. You can do that by listing items you can put up as collateral. When you show you have the assets to cover the loan, the lender will likely view you as less of a risk.
3. Clean Up Your Credit Ahead of Time
No matter how successful your business is, you will have a hard time getting approved for a loan if you have poor credit or too much debt. You want to show the lender that you’re not a risk, and that is precisely what they’ll think if you haven’t taken the time to clean up your credit before you applied for a loan.
Pay your bills on time, review your credit report, and dispute any discrepancies. If you have already paid off accounts that have been sent to collections, but they’re still showing up on your report, call the collections company and ask them to be removed.
Getting approved for SBA loans can take some time and patience. However, when you know what mistakes to avoid, you’ll find the process easier to handle.
