Are you ready to take the next step to grow your business? If you’ve hit a wall with your business plan, have plateaued in sales or are simply looking for a change—it might be time to apply for a business loan that can provide the stimulation your business needs to get over the hump.
A great option for a lot of small businesses is an SBA loan, which is a loan guaranteed by the Small Business Association (SBA). The SBA is an organization that connects entrepreneurs with lenders and funding to help them plan, start and grow their business.
SBA-guaranteed loans generally have rates and fees that are comparable to non-guaranteed loans. They also have unique benefits such as lower down payments, flexible overhead requirements and no collateral needed for some loan types–attractive features for any small business.
Sounds pretty great, right?
If you’re wondering if your business is ready to take the plunge, here are five things to look for to determine if it’s time to apply for an SBA loan.
1. You’re running out of space.
One of the most common signs it may be time to apply for a small business loan is that you’ve literally run out of space. Either you need to hire more employees and have nowhere to put them, need more room for inventory or just want to upgrade your space to meet marketing demands.
Buying a new space or expanding your current space is expensive. But with the right SBA loan, it can be both doable and worth it to get you the room you need to keep growing your business.
2. You can’t keep up with the demand.
Perhaps your organization is doing so well that you can barely keep up with incoming sales. You may not have the cash upfront to pay for more inventory or to get some extra hands on deck to fulfill orders.
This is a great problem for any business to have—but one that still needs a solution. Applying for (and securing) an SBA loan is just that for many fast-growing small businesses. And the boom in demand should help you sustainably pay off your loan with ease.
3. You have a good credit score.
One of the first things a lender will do when you apply for a loan is to check your business credit score. If you already have a good credit score—and you should find out what it is before applying—you are already a step ahead. The best time to apply for an SBA loan is when you know your credit is in great condition.
A solid credit score will give you the best chance at getting low-interest rates, longer-term loans and will build immediate trustworthiness between you and your lender.
4. You have a plan—and the means—to pay back a loan.
You should go into any loan process fully prepared. Before considering an SBA loan, determine how much capital you will need, as well as how you plan to use the funds before going to apply.
When you do go to meet with your potential lender to apply, you should bring financial projections to aid in the discussion of how your business finances work, how you will use the lender’s money and how you are going to pay it back. Be prepared to provide collateral options if needed, such as a piece of real estate, inventory or your car.
5. You meet the qualifications.
If you know you want to take your business to the next level, and an SBA loan sounds ideal—the next step is ensuring you qualify. Prior to securing an SBA loan, determine whether or not your business meets all the qualifications set forth by the SBA.
- You must be considered a small business according to the U.S. Government. (This table and tool are easy ways to calculate if you meet the SBA loan requirements.)
- Your business needs to be a for-profit organization.
- This loan type is restricted to businesses located in the U.S.
- You must provide a strategy or plan to prove your ability to repay the loan.
- You must demonstrate you have a defined, solid business plan and purpose.
- You must be personally invested in your company’s success.
Are you ready to apply for an SBA loan and take your business to new heights?
Once you’ve determined you qualify for an SBA loan, choose which type of loan makes sense for your business. SBA loans aren’t one size fits all, so finding the right one for your business is a critical next step.
You’ll need to determine if you need working capital (revolving credit or to refinance an existing debt) or a fixed asset (for new space, new equipment, remodeling, etc.). Two of the most common SBA loans are the SBA 504 loan and the SBA 7a loan:
- The SBA 504 loan is set up for existing businesses and tends to have longer-term fixed interest rates.
- The SBA 7a loan, meanwhile, is generally used by entrepreneurs just starting their venture or purchasing an existing business. These loans are more likely to have a variable rate.
When you meet with your lender, they can explain these SBA loan differences in greater detail—and help you choose the best option for your small business!
Need help evaluating and applying for an SBA Loan? The experts at Certified Development Company (CDC)Growth Capital can help answer any questions you might have, and get you on track to grow your business like never before. Contact our loan experts today at (216) 592-2332 or fill out this online form.