There is one universal truth in any enterprise: starting and running a small business costs money. Various funding programs enable the Small Business Administration (SBA) to guarantee financing by approved lenders, and an SBA loan could provide a necessary boost for your company.
Can an SBA Loan Help Your Business?
Debt sometimes seems like a dirty word. However, there are several instances where the potential benefits might outweigh incurring debt:
- Building a credit history for your new company
- Hiring personnel or consultants
- Purchasing new inventory or equipment
- Expanding an existing or acquiring a new location
If insufficient cash flow is hindering growth, it may be time to talk to your bank.
Tips to Take to the Bank
Research available lending institutions. Compare the available products, application requirements, and interest rates.
Take a hard look at your budget. Be specific about your need, the intended use for a loan and how repayment fits into your overall plan. Lenders can use this information to recommend the best type of loan for your business.
The length of time you have been in business matters. If your company is brand new, build your history by making as many sales as possible before applying for an SBA loan. You should also know your business credit score before you seek funding, as this helps investors determine your eligibility for financing. Awareness beforehand can forestall unpleasant surprises during the application process.
Have your financial statements (monthly bank and credit card statements may also be acceptable) in good order so your lender can help you decide on a proper loan amount. Be transparent about any existing debt your company has. Unpaid debt won’t necessarily disqualify you, but it could help you avoid taking on more liability than you can handle.
Be readily available and willing to assist throughout the entire application progression. Your lender will likely have follow-up questions, and providing quick answers could speed up the process.
Be Wise With Your New Money
After depositing your SBA loan check, add the debt payment to your recurring expense budget immediately. Consider establishing or increasing an emergency cash reserve so you can meet your obligation in case of an unforeseen stall of cash flow. Remember, you can also save on interest by repaying the debt ahead of schedule.
Don’t let valuable opportunities for growth pass by – put your loan to use. Every day you wait to utilize these funds may delay the profits your company could realize.
Above all else, don’t go crazy with your newfound wealth! Stick to your original plan for the money; if the results supersede your expectations, count your blessings and manage the surplus wisely.
