Skip navigation

SBA loan application

  • 7(a) loan program: Borrower Information Form — SBA Form 1919
  • SBA Express: Please see your Bank of America business banker for the most current form.
  • Microloan program:
  • CDC/504 loan program: Application for Business Loan —
  • Disaster loans: 

After a presidential disaster declaration, submit a Disaster Loan Application and IRS Form 4506-T directly to the SBA.  The following information will be required:

      1. Contact information
      2. Social Security number          
      3. FEMA registration number
      4. Deed or lease information
      5. Insurance information
      6. Income, account balance, monthly expenses and other financial information
      7. Employer identification number (EIN) for business applicants

 

Business certificate or license

Be ready to present your original business license or certificate. If your business is a corporation, you can simply stamp your seal on your SBA application form.

 

Income tax returns

Submit your returns for the previous three years, including personal and business returns for each of your company’s principals.

 

Business overview and history

Here is where you tell your company’s story. It can be brief but should include what challenges you’ve faced, how you’ve overcome them, why you need an SBA loan and how it will benefit your business.

 

Personal background and financial history

 

Business financial statements

  • Profit and loss (P&L) statement: Summarize your revenues, costs and expenses to within 90 days of your application, including supplementary schedules from the past three fiscal years.
  • Projected financial statement: Predict your income and finances for the coming year in detail, including a written strategy for how you plan to get there.

 

Ownership and affiliations

Do you have subsidiaries or affiliates? List them all here, including all controlling interests, stock ownership, franchises, proposed mergers and all other such concerns.

 

Loan application history

 

Résumés

Submit a résumé for every principal involved in your business.

 

Business lease

 

If you’re purchasing an existing business, please provide:

  • Current balance sheet of prospective business
  • Profit and loss statement of prospective business
  • Two years of federal income tax returns of prospective business
  • Proposed bill of sale (including terms of sale)
  • Complete schedule of inventory, machinery and equipment, and furniture and fixtures
  • Confirmed asking price

 

All programs subject to credit approval and loan amounts are subject to creditworthiness. Some restrictions may apply. The term, amount, interest rate and repayment schedule for your loan, and any product features, including interest rate locks, may vary depending on your creditworthiness and on the type, amount and collateral for your loan. Bank of America may prohibit use of an account to pay off or pay down another Bank of America account. Repayment structure, prepayment options and early payoff are all subject to product availability and credit approval. Other restrictions may apply.

The Small Business Administration (SBA) is a government agency dedicated to small business growth. The organization offers several loan programs for a wide variety of needs and company types, but the SBA does not directly lend money; they partner with banks, community development organizations and micro-lending institutions and set guidelines for how those lenders can structure loans. Each type of SBA loan is unique and involves parameters and stipulations not necessarily offered in other SBA loans. These conditions often revolve around how the money can be used and the terms under which it should be repaid.

 

Ready to apply? – Now it’s time to get ready to complete and present all the necessary paperwork.  Follow the five steps to a successful SBA loan application1:

 

Step 1. Know exactly what your business needs are.

Know the answers to these questions:

  • Why do you need the money?
  • How much do you need?
  • How long will it take you to pay it back?
  • What is the current financial health of your business?
  • Do you have collateral to put up?
  • How fast do you need the money?

 

The answers you give may help determine your best course of action. Once you know how much you need and how it will be used, the better equipped you’ll be to determine the best loan option for your business needs.

 

Step 2. Know what lenders are looking for.

The 5 C’s of Credit:

  1. Capacity – Can your business absorb unexpected expenses or a downturn in the economy?
  2. Capital – Do your assets outweigh your liabilities? How much capital have you and others invested?
  3. Collateral – This includes accounts receivable, inventory, cash, equipment, and commercial real estate.
  4. Conditions – Certain factors may affect your ability to make payments, such as the economy, industry trends, and pending legislation.
  5. Character – Personal integrity, industry experience, credit history, and good standing are critically important. 

 

Be prepared to detail what you plan to do with the borrowed funds. Back up your request with facts that support how much you are asking to borrow. Lenders appreciate the effort, and it will give them the confidence they need to trust in your ability to pay them back.

 

Step 3: Provide and overall financial snapshot of your small business.

Be prepared to present your small business in the best light possible.

Be ready to share details about the financial side of your business. Provide the lender with a comprehensive background on your company, future growth plans and your own personal information.

  • Maintain a good credit score
  • Borrow only what you know you can pay back
  • Present a repayment plan, complete with projections and a safety net
  • Show a history of paying bills on time
  • Provide collateral

 

Step 4: Choose the SBA loan that is right for your business

The 5 types of SBA Loans:

  1. SBA 7(a) Loan
  2. SBA Express Loan
  3. SBA Microloan
  4. SBA 504 Loan
  5. SBA Disaster Loan

 

Read more about the 5 types of SBA loans.

 

Step 5: Complete and present all the necessary paperwork.

  • Get a checklist here.

 

 

1All programs subject to credit approval and loan amounts are subject to creditworthiness. Some restrictions may apply. The term, amount, interest rate and repayment schedule for your loan, and any product features, including interest rate locks, may vary depending on your creditworthiness and on the type, amount and collateral for your loan. Bank of America may prohibit use of an account to pay off or pay down another Bank of America account. Repayment structure, prepayment options and early payoff are all subject to product availability and credit approval. Other restrictions may apply.

More business owners are looking to borrow capital today than in recent years. There are many reasons for this: to provide better training and development for employees; to invest in new equipment or to expand operations; and to enhance health benefits and improve salaries, among others.

 

What is a Small Business Administration (SBA) loan?

 

The SBA is a government agency dedicated to small business growth. The organization offers several loan programs for a wide variety of needs and company types, but the SBA does not directly lend money; they partner with banks, community development organizations and micro-lending institutions and set guidelines for how those lenders can structure loans. Each type of SBA loan is unique and involves parameters and stipulations not necessarily offered in other SBA loans. These conditions often revolve around how the money can be used and the terms under which it should be repaid. The details of the program are constantly changing, so the more familiar your banker is with SBA loans, the simpler the process could be for you.

 

There are two types of lenders that handle SBA loans:

  1. SBA standard lender – this qualified lender must submit transactions for review and receive a guarantee upon approval for every loan.
  2. SBA preferred lender – this lender is the more qualified of the two types. Loan approval times can be reduced because the SBA checks only the lender’s justification of eligibility for the borrower, not their underwriting. Bank of America is an SBA Preferred Lender.

 

SBA Loan Advantages:

  1. Guaranteed by the government. If the loan is defaulted or unpaid, the lender can ask the government to honor the loan. This reduces the risk to the lender, allowing it to extend credit to borrowers it might otherwise decline.
  2. Favorable terms. Because of the government guarantee, lenders may be able to provide loans with more favorable terms than a conventional loan.
  3. More time to pay. Repayment terms are longer than traditional loans, extended to up to 10 and even up to 25 years in some cases. Plus, on loan terms of less than 15 years, there is no prepayment penalty.
  4. Affordability. SBA loans often require lower down payments, which allows the borrower to preserve the cash they need to operate the business.

 

Things to be aware of:

  1. Complex Process. Due to the government’s involvement, the application process may be more document-intensive and could possibly include extra fees not found in traditional loans.
  2. Lengthier Approval. The time it takes to get approved or denied can be much longer than with a conventional loan.
    • Applying for an SBA loan can be time consuming. Fortunately, the SBA has a Preferred Lenders Program (PLP) that’s designed to simplify and expedite the loan-approval process.

 

Learn more about Small Business Administration Loans from Bank of America.1

 

1All programs subject to credit approval and loan amounts are subject to creditworthiness. Some restrictions may apply. The term, amount, interest rate and repayment schedule for your loan, and any product features, including interest rate locks, may vary depending on your creditworthiness and on the type, amount and collateral for your loan. Bank of America may prohibit use of an account to pay off or pay down another Bank of America account. Repayment structure, prepayment options and early payoff are all subject to product availability and credit approval. Other restrictions may apply.

If you’ve read our previous post, “Need a loan? The Small Business Administration can help." you’re familiar with some of the reasons why the United States government guarantees loans to small businesses. The next step is to decide which of the SBA’s five loan types that best fit your needs.

 

SBA 7(a) loan

  • The 7(a) loan is the basic SBA loan; designed to finance established small businesses.
  • It can offer access to more capital with longer terms and, in many cases, improved cash flow.
  • Flexible and ideal for general business purposes and operational expenses, such as:
    • Purchasing or expanding a business
    • Working capital, improvements, or refinancing
    • Equipment, including machinery and vehicles
    • Furniture and other office essentials such as printers, fixtures, and more
    • Purchase, refinancing, build, or renovate commercial property
  • Advantages:
    • Longer maturity and easier qualification than conventional loans
    • Lower down payments
  • Loan Maturity:
    • Up to seven years for working capital
    • Up to 10 years for equipment and business acquisition
    • Up to 25 years for real estate
  • Maximum loan amount: 
    • $5 million

 

SBA Express loan

  • This loan is generally used for equipment and working capital. Connect with your business banker or loan specialist to learn more.
  • Ideal for:
    • Working capital
    • Purchasing equipment
    • Financing vehicles or inventory
  • Advantages:
    • Longer maturity than some conventional loans
    • Easier qualifications than a conventional loan
  • Loan Maturity:
    • Up to seven year-term with first-year revolving option and balance amortized across the remainder of the term for working capital
    • Up to 10 year term for equipment
  • Maximum loan amount:
    • $350,000

 

SBA Microloan

  • This is a very small, short-term loan, typically offered to new and growing small businesses and to certain types of not-for-profit child care centers.
  • For microloans, you may need to fulfill training or planning requirements designed to help you launch or expand your business in order to be considered eligible.
  • Ideal for:
    • Working capital
    • Supply and inventory purchases
    • Equipment, including machinery and vehicles
    • Furniture and other office essentials such as printers and fixtures
    • Partner buyouts
  • Cannot be used for:
    • Debt repayment
    • Real estate
  • Maximum repayment term is six years and varies based on:
    • Amount
    • Plans for the funds
    • Needs of the borrower
    • Specific lender requirements
  • Maximum loan amount:
    • $50,000
    • Average loan: $13,000

 

SBA 504 loan

  • Primarily used for real estate and equipment, this loan offers long-term, fixed-rate financing for major assets, including land and buildings.
  • To qualify:
    • Net worth of your small business should be less than $15 million
    • Net income cannot exceed $5 million after taxes for each of the previous two years
    • SBA covers 40% of total cost, lender covers up to 50%, and borrower puts up the remainder
  • Ideal for:
    • Buying land
    • Financing long-term machinery
    • Purchasing existing buildings
    • Building or renovating facilities
    • Refinancing debt (must be connected to business expansion)
  • Cannot be used for:
    • Working capital or inventory
  • Advantages:
    • Longer maturity and easier qualification than conventional loans
    • Lower down payments or fixed assets
  • Loan maturity:
    • Up to two years on interim construction period
    • 7 to 10 years on equipment
    • 10 to 20 years on real estate
  • Maximum loan amount:
    • $350,000 minimum, no maximum

 

SBA Disaster loan

  • Designed to help businesses damaged, destroyed or affected in a declared disaster, a disaster loan offers low interest rates.
  • Can be used for repairing or replacing business assets such as:
    • Real estate
    • Machinery
    • Equipment
    • Inventory
  • Maximum loan amount:
    • $2 million
  • Following a presidential disaster declaration, a Disaster Loan Application and IRS Form 4506-T must be submitted directly to the SBA. The following information will be required:
    • Contact information
    • Social Security number
    • Federal Emergency Management Agency(FEMA) registration number
    • Deed or lease information
    • Insurance information
    • Income, account balance, monthly expenses, and other financial information
    • Employer identification number (EIN) for business applicants

 

Learn more about Small Business Administration Loans through Bank of America.1

 

 

1All programs subject to credit approval and loan amounts are subject to creditworthiness. Some restrictions may apply. The term, amount, interest rate and repayment schedule for your loan, and any product features, including interest rate locks, may vary depending on your creditworthiness and on the type, amount and collateral for your loan. Bank of America may prohibit use of an account to pay off or pay down another Bank of America account. Repayment structure, prepayment options and early payoff are all subject to product availability and credit approval. Other restrictions may apply.

 

Watch the video above to see a brief comparison of the different lending products and features, to help you understand how credit options can support every stage of your business journey.

 

Video transcript:

 

[Visual title: Borrowing options for small businesses]

 

Most small businesses use credit—like a loan or a credit card—at some point.

 

[Visual of a small business owner accepting a delivery of soil and seeds]

 

Let’s take a quick look at some borrowing options that can help you cover anything

 

[Visual of a flower truck expanding into a larger truck]

 

from the day-to-day to a big expansion.

 

[Visual showing Business credit card, Grace period and Next billing cycle]

 

If you haven’t established your business’s credit yet, getting a business credit card could be a good place to start. It’s great for everyday purchases, and business cards may come with a grace period—where you won’t be charged interest on your purchases until the next billing cycle.

 

[Visual of Cash back and Travel rewards cards]

 

And many credit cards have rewards programs—like cash back or travel rewards.

 

[Visual title: Unsecured lines of credit]

 

Now, an unsecured line of credit works like a credit card, but it gives you a lot more flexibility. The main difference is that you can use your entire credit line as cash—

 

[Visual of a hand looking over Invoices and Payroll]

 

which means you can use it for any of your business's operational expenses.

 

[Visual showing higher credit line and lower interest rate on unsecured line of credit vs. a credit card]

In addition, the amount you can borrow using an unsecured line of credit is often more than you can with a credit card. And the interest rates on an unsecured line of credit are often lower than those on a credit card.

 

Like a credit card, the interest rate is variable, and your minimum monthly payments are based on how much you’ve borrowed. However, there's no grace period—meaning interest will start to accrue on what you borrow as soon as you borrow it.

 

But, because of the lower interest rate, an unsecured line of credit can be a cost-effective way of covering the gaps between your payables and receivables—if you need the access to credit.

 

[Visual title: Secured term loan]

 

Now, you might choose a secured term loan if you're looking to cover a large expense like new equipment or a renovation.

 

The loan is secured by the item you're purchasing. This works like an auto loan, where you offer the asset you're purchasing, your car, as collateral.

 

[Visual of types of secured term loans: Equipment loan, Commercial vehicle loan, Real estate loan]

 

Unlike a line of credit, secured term loans are more structured: you’ll receive the money for your purchase all at once, and you'll make fixed monthly payments over a predetermined amount of time. For example, you might get a 5-year loan. That means your loan should be paid off within 5 years.

 

There are different types of secured loans that serve different purposes.

Some have specific lending requirements. But these loans generally have lower interest rates than you'd get from an unsecured line of credit,

 

[Visual of a flower truck transforming into a flower storefront]

 

which may help if you're planning on a major upgrade for your business that you'll need a few years to pay off.

 

Different borrowing options will have different pros and cons for you and your business.

 

[Visual weighing hypothetical pros and cons of a Business credit card, Lines of credit and a Secured term loan]

 

Get in touch with your small business specialist to learn more about your options and how Bank of America can help your business grow.

 

[Visual: Bank of America logo]

 

Banking products and services provided by Bank of America, N.A. Credit cards issued and administered by Bank of America, N.A. Credit cards, credit lines and loans are subject to credit approval and creditworthiness. Some restrictions may apply. Bank of America is a trademark of Bank of America Corporation. Bank of America, N.A. Member FDIC © 2019 Bank of America Corporation.

By David Burch

 

As an entrepreneur, you may rely on a variety of sources for capital – such as banks, family, personal savings or even angel investors. Regardless of the financing sources you tap or the stage of your business, securing and accessing capital is likely to play a critical role as you plan for future growth.

 

34977526_s+copy.jpgAccording to the Bank of America spring 2017 Small Business Owner Report, more than half of small business owners nationwide are planning to grow their business over the next five years. If you’re among those millions of business owners planning for long-term growth, what should you know about financing that growth?

 

Below are top strategies to help secure financing, identify resources for capital, and navigate through emotions and financial arrangements when funding is provided by loved ones.[1]

 

1. Know the “5 Cs”

To increase your chances of securing funding, planning is essential – and a key component of that preparation is having a general understanding of creditor expectations. While each business is different and has unique financial needs, there are generally “5 Cs” that creditors evaluate when making lending decisions for small businesses: Capacity, Collateral, Capital, Conditions and Character.

  • Capacity evaluates whether your business can support debt and expenses. Typically, you need enough cushion to absorb unexpected expenses or a downturn in the economy.

  • Collateral can be offered as security for repayment and forfeited in the event of a default. Examples of collateral include accounts receivable, inventory, cash, equipment, and commercial real estate. Creditors may also take into consideration existing debt that your business may still owe on collateral.

  • Capital takes a look at whether your business’ assets outweigh its liabilities, and how much capital you and other outside sources have invested.

  • Conditions such as the economy, industry trends and pending legislation may be a consideration, although these are often out of your control as an individual small business owner.

  • And finally, Character – your own character and the character of those tied closely to the success of your business – is critically important. Factors such as personal integrity, industry experience, and good standing can make a difference.

 

2. Treat every loan as a contract – regardless of the source!

/videos/1039 When you’re starting out, the financial support you might receive from family and friends can make a big difference in helping to get your business off the ground. However, this can sometimes cause stress and awkwardness for everyone involved. To minimize this, it is important to create a contract for every type of loan you receive – whether it’s a financial agreement with a family member, friend or a bank. It can be immensely helpful to clarify up front with family and friends whether you are receiving a gift versus a loan. If it’s a loan – are they expecting some interest to be paid back? Do you need to pay back the loan within six months, a year, or is there more flexibility? Does your family member or friend want something in return, such as a stake in your business? To avoid unnecessary stress and confusion, it is important to know and write out the full terms of your agreement so you can focus your efforts and energies on making your business successful instead of worrying about misunderstandings.

 

3. Take advantage of resources

There are a variety of available resources you can turn to for lending advice, guidance and support – family members, friends, your professional network, financial experts, small business advocates, online content and more. Take advantage of this vast well of knowledge. I also encourage you to meet with a small business banker. They are experts in small business lending and can provide advice about what is best for you and your business, both in the short- and long-term. Even if you are just starting out and don’t think you will qualify for a bank loan, small business bankers can give you guidance on where to turn for capital. They can also help you develop a business plan so you get where you need to be to receive a traditional bank loan.

 

There is a treasure chest of free online tools and technology that can make life easier for business owners, such as Nav and the Small Business Administration. You can also turn to Google to search for answers to your questions, but a word of caution - use Google searching as a starting point, and always double check with other reliable sources to make sure you are getting good advice.

 

Want to learn more about securing the financing you need to grow your business? Check out the Bank of America Small Business Community for tips and information on accessing capital and more.[2]

 

 


[1] The views and opinions expressed herein are solely those of Bank of America, NA (the “Bank”), and have been obtained or derived from sources believed by the Bank to be reliable. The information provided herein is solely for educational purposes, and the Bank does not recommend that the information serve as the basis of any business decision and may not be construed as such. The Bank does not make any representation or warranty, express or implied, as to the information's accuracy or completeness, and the Bank makes no promise or guaranty that any particular measure of success or results will be achieved from relying on the information provided herein

 

[2] Bank of America, N.A. (the “Bank”) provides informational reading materials for your discussion and review purposes only. Please consult your tax advisor, as neither the Bank, its affiliates, nor their employees provide legal, accounting and tax advice. Credit is subject to approval, loan amounts are subject to creditworthiness, and normal credit standards apply. Some restrictions apply.

By Joe DiNicola, Bank of America Practice Solutions executive

 

 

Hangouts-Logo.gif

Access to capital is a vital component of growth for small businesses. While credit demand was lower in the years immediately following the 2008 recession, the lending market is much more fluid now. According to the spring 2015 Small Business Owner Report, 39% of small business owners said they have applied for a loan in the past two years, up from 28% a year ago. In addition, 19% of small business owners intend to apply for a loan this year, compared with 14% a year ago. And these numbers are even higher among younger small business owners.

 

In light of the importance of access to capital for small business owners, this month’s installment of the Bank of America Small Business Social Series discusses how to help entrepreneurs prepare, negotiate for and secure capital.  Click the video below to watch.

 

 

Carol Roth, author and CNBC personality, hosted the discussion. Participants included myself, as well as Barbara Weltman, Publisher of Idea of the Day® and Big Ideas for Small Business®, and Steve Strauss, author and small business columnist for the USA TODAY.

 

We hope you’ll watch! You can also check out previous Google Hangouts which have covered finding balance, tax tips, women and small business and more.

by David Tremblay.


There is no silver bullet when it comes to getting a loan to fund your business.  With Small Business lending on the rise, knowing how to approach the process can help you secure a loan more quickly than others in your industry. When it comes down to it, it’s all about Ability, Stability, and Willingness to Pay, limiting uncertainty on the lender’s side by providing a very detailed plan.

 

Respondents were split when asked by our Fall Small Business Owners Report what they believe is the most important factor in receiving a loan.

Small Business Owner Report Graphic

The funny thing is that none of them are wrong.  Most financial institutions look at ALL those things, but in reality, less-than-perfect credit scores or a lack of a previous business borrowing history won’t carry the same weight individually that cash flow does. It’s also important to have a good relationship with your banker, who can provide context if one of those factors comes up short. Figuring out how much to ask for when applying for a business loan is part and parcel of the factors above. Here are a few thoughts on how financial institutions look at those different factors:

 

Cash flow:  Cash flow is typically considered the primary source of repayment for credit. It is important because that’s what repays the lines of credit and loans that banks extend to clients.  Does your business have the financial capacity to support debt and expenses?  Do your assets outweigh your liabilities? Typically a business needs to have between $1.15 and $1.35 of income to support every $1 of debt service, including the new debt being requested. The extra $0.15 to $0.35 provides a cushion for your business to absorb unexpected expenses or a downturn in the economy. It is important for the business to demonstrate more than one year of adequate cash flow history to show consistency in the ability to service debts. The ability to use projected cash flows as opposed to historical cash flows is uncommon.  Inadequate cash flow is a frequent reason why banks are unable to extend new credit to businesses.

 

Image of David TremblayCredit score:  Banks often look at multiple credit scores – business scores, consumer scores of the owners who will act as personal guarantors, and other internal scores based on bank risk factors and relationships. The credit scores of the business and individual owners in and of itself aren’t nearly as important as what is driving them, but the scores still play an important role in predicting creditworthiness.  As Jeannie Kelly also notes in a post running today on the MasterCard Small Business site, important drivers of credit scores are payment history, amounts owed, length of credit history, types of credit used and new credit opened.

 

Track record of ability to repay previous loans:  Relationships are important to banks, whether new or existing. An established borrowing and/or deposit relationship with their bank is often beneficial to the applicant requesting new credit. An existing borrowing and/or deposit relationship can offer immediate insight into the potential creditworthiness of the applicant based on the bank’s established risk guidelines.  When applicants have a proven track record of adequate repayment of previous loans, the decision to extend new credit is often an easier or quicker one to make.  The length of time for a bank to consider a small business to have a proven repayment track record can vary. Two years would be considered a minimum but 5+ years is preferred in order to establish trends that cross different economic cycles. Business borrowing history is less important than credit scores or cash flows but it brings an additional positive factor to the lending decision.

 

Annual revenues:  The gross annual revenues of a business is one factor that helps banks size potential credit needs and guide applicants to the most appropriate products available.  Annual revenue size is an indicator of how marketable the product or service is.  After our established revenue minimum of $250,000 for lines/loans, revenue trends over several years become far more important than the number itself.  Banks also care more about client base diversification to provide cushions in volatile markets. 

 

Personal finances:  Work experience, experience in your industry, and personal credit history are all “character traits” banks will consider. Your personal integrity and good standing—and the integrity and standing of those closely tied to the success of the business—are critically important. Business owners who have demonstrated challenges in managing their personal finances will have higher hurdles to obtaining new credit for their business. Related to this, many banks will ask how much stake the owners have in their business. If leadership is heavily invested monetarily in their own business, the bank sees this as a higher commitment to success, and therefore a higher chance of repaying the loan. To be further prepared for the loan application process, the Small Business Administration website has a Business Loan checklist that goes in more detail.

 

Again, it’s important to develop a strong relationship with your business banker – before you ever ask for credit. If that person understands the story behind the factors above, she can make the process much easier and help you get a yes to your loan request.

 

This month, I’ll be part of a Google Hangout on this very topic, so feel free to revisit this post for an updated start time. Top small business influencers from around the country will be discussing what drives credit decisions.

Filter Article

By tag: