Don’t Make These Mistakes As a New Business Owner When Getting an SBA Loan
The Small Business Administration has been around for over 60 years helping small businesses succeed by providing loan assistance programs. While the SBA does not fund the loans, they work with lenders to secure the money you need at rates and repayment terms you can afford. SBA loans are great tools to help when you need some cash to get the business going or purchase a new space. There are a few things you should know before you start the process, so you can avoid common mistakes that may keep you from getting the cash your business needs.
You Don’t Know How Much Money You Need To Borrow
Before you decide to go through the commercial loan process, you first need to get a handle on how much money you need. One of the biggest mistakes business owners make is going into the application process with no idea how much capital infusion is required. Stumbling over the amount of the loan may send the wrong message to lenders.
You Don’t Have a List of Collateral
Lenders want to see that you believe in your business enough to put up personal property and money as collateral to secure the loan. While some SBA loans don’t necessarily need collateral backing, lenders still like to see that you have considered it. Compile a list of your property and assets that are available as collateral if needed.
You Don’t Have the Down Payment
The SBA recently changed its down-payment requirement, lowering it from 25 percent to 10 percent. The decrease opened up SBA loans to more business owners by not tying up all the cash in the down payment. Not knowing there is a down payment and not having the money at the ready are indicators that you aren’t prepared.
Your Financials Don’t Show Positive Cash Flow
If you’ve been in business at all, you should be able to show some cash flow. Even if you started out rocky, as time has gone on, the company should have some regular rate of money. Banks won’t look too highly on a business that has no cash or spends more than it makes.
You aren’t trying to secure a business loan because you have a ton of capital in reserve – you’re doing it because you need the extra funding to continue your business growth. Avoiding these common mistakes during the process may help you secure one of the SBA loans the agency offers.