Starting a business requires extensive planning. First of all, you need to think about the type of business you want to have. You also have to consider other factors, such as your location, human resources, and initial capital. If you are planning to get a loan to start your small business, you can avail of an SBA Loan in Ogden or other reputable lenders near you.
What is an SBA loan?
An SBA loan is a popular loan that has already helped countless entrepreneurs start their business ventures. SBA loans often cater to small business owners who are looking for funds to grow their business further. The federal government backs such investments through the U.S. Small Business Administration.
This type of loan often offers low interest, with a variety of loan sizes and repayment terms that won’t be too heavy for small business owners’ budgets. SBA loans work with accredited lenders to provide the needed loan amounts for small business owners.
This means the SBA does not lend the money directly. Instead, it sets lending guidelines to its lending partners. Likewise, it reduces lending risks and makes capital access and loans straightforward for small business owners. However, getting an SBA loan might not be as easy as you think.
Possible reasons for SBA loan rejections
While SBA loans might be heaven-sent for start-up business owners, your loan application can be rejected. Here are some possible reasons:
1. Low credit score
First, you should have a good credit score to be approved for the SBA loan. Most banks do not accept credit scores lower than 600. You might be better off finding lenders that are more lenient on credit scores.
2. New business
You might think that because you have a start-up business means that you can quickly be approved for the loan. However, it might not always be the case. Most banks say that the business should be in operation for at least a couple of years. In other words, the business owner should set a good track record before applying for an SBA loan.
3. No collateral
Many banks do not accept SBA loan applications without a guarantee. This is supposed to assure that you will be able to repay the loan in case your business fails. Otherwise, your loan application will be thrown to the bin.
4. A business venture that is not covered by SBA loans
This includes businesses such as specific health ventures and franchises, life insurance, and cannabis-based enterprises, among a few.
How to apply for an SBA loan
Aside from considering the mentioned requirements, you should also prepare the following documents when applying for an SBA loan:
- Business plan and debt schedule
- Business and personal tax returns
- Driver’s license
- Latest bank statements and balance sheets
- Business check
Overall, getting a loan might be the best solution if you want to fund your small business. However, you need to consider several factors to guarantee approval. This includes having a good credit score, enough collateral, and years’ worth of business experience.