SBA Loans: Make sure you are ready


Most loans require paperwork and documentation, Small Business Administration (SBA) loans are no different. When it comes time to find financing for your small business, SBA loans are the darlings of many businesses because the terms are longer and a portion of the loan is guaranteed by the SBA.

As the most popular of the SBA loans, the Standard 7(a) loan includes flexibility in what the funds can be used for, interest rates that can be fixed or variable, lower down payments than other types of business loans, and maximum loan amounts up to $5 million.


But are you prepared?


Assessing the Criteria for a 7(a) Loan

Before you begin marching down the path to secure an SBA 7(a) loan, make sure you meet the criteria for consideration. You must:


  • Be a for-profit United States business
  • Operate in an eligible industry. 13 CFR § 120.110 provides a list of business types that are ineligible for SBA business loans. Included on the list are financial businesses primarily engaged in the business of lending, life insurance companies, pyramid sale distribution plans, and businesses that have previously defaulted on a federal loan resulting in a loss for the Federal government or any of its departments.
  • Be a small business as defined by the SBA. The SBA assigns a size standard to each classification in the North American Industrial Classification System (NAICS). Because business activity varies dependent on the industry, small business classification comes in all shapes and sizes and includes the number of employees, revenue and the business’s net annual income.
  • Be engaged in, or propose to do business in, the U. S. or its possessions
  • Have reasonable invested equity
  • Use alternative financial resources, including personal assets, before seeking financial assistance
  • Be able to demonstrate a need for a loan
  • Plan to use the funds for a sound business purpose
  • Not delinquent on any existing debt obligations to the U.S. government


Get Ready for your Lender

Now that all those boxes are checked, it’s time to get ready for the banker.


Credit Score

How’s your credit score? Remember, the SBA is only guaranteeing the loan, not providing it, so you will need to figure out the credit score requirements with the institution that will be financing the loan. A good rule of thumb is a score of over 680.


SBA form requirements

Two required SBA forms that must be submitted with any 7(a) loan application. While they might seem a bit tedious, they are excellent guides for the paperwork you are going to need to prepare and collect.

  • Form 1919 – Borrower Information Form. According to the SBA, its purpose is to collect information about the “…applicant and owners, the loan request, existing indebtedness, information about current or previous government financing, and certain other topics.” All questions must be answered, and signing the form authorizes background checks to be performed on the applicants.
  • Form 413 – Personal Financial Statement. This form is intended to collect the financial information of the applicant as well as any of the owners. It includes providing assets, liabilities, income sources, real estate owned, taxes due and life insurance information.

Your lender may also ask you to complete SBA Form 912 – Statement of Personal History.


Other documentation

Other documentation to gather or prepare includes:

  • Personal and business financial statements, including profit and loss statements and projected income and finances
  • Personal and business income tax returns and bank statements
  • Copy of your business license, certificate or other legal documents
  • Tax identification number(s)
  • Loan application history
  • Resumes for each business principal
  • Business plans
  • Business narrative
  • Copies of any leases


Additional lender requirements

While the SBA site does not specifically state requiring a few items, it is almost universally required that to get an SBA loan you:

  • Have been in business for at least two years
  • Can provide a down payment (usually 10% of the borrowing amount)
  • Can offer some form of collateral
  • Provide a personal guarantee


Give us a call

American National Bank works regularly with small business financing including the various types of SBA loans. While SBA loans are great, sometimes you don’t meet the criteria, or an SBA loan may make sense for one goal and alternate financing might make sense for another goal. When you work with an experienced, trusted banking partner who can help guide you in building and growing your business, your opportunities also grow.


Kalen Schwartz

Commercial Banking Team Leader,
Mergers & Acquisitions


Kalen Schwartz is a Vice President and Commercial Banking Team Leader in American National Bank’s Minneapolis location. Kalen specializes in business financing, partner buyouts, and small business lending including SBA loans. He is a regular panelist on “Buyers Bootcamp”, a professional, informational panel dedicated to buying and selling businesses.


Call Kalen

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