How to apply for SBA business loans

SBA loans help business owners access funding at a crucial early stage in their companies. Once you’ve decided which type of Small Business Administration (SBA) loan you’re ready to apply for, it’s time to assemble the right documents and materials to submit. The business loan application process is like that for other bank loans, with a few additional forms. This article will explain step by step the nuances of SBA loans.

Find an SBA-approved lender in your area

The SBA’s website has an online tool for finding lenders according to your specific needs. Most major banks, including Chase for Business, offer some form of SBA lending.

While the SBA guarantees a variety of loans through programs such as 7(a) loans, 504 loans and microloans, you’ll need to apply directly to a local lender in your area, not the SBA. That’s because the SBA’s role is to ensure your creditworthiness and eligibility for a federal loan program, but it’s the bank’s job to administer the loan.

How to apply for small business loans

Once you’ve found the right lender, you’re ready to start gathering the materials for your small business loan application. The first 4 steps address obtaining credit approval with your lender, while steps 5 & 6 are typically presented after credit approval, and used to confirm your SBA eligibility for the project. To apply, you’ll need to:

Step 1: Write a history and overview of your business

An important item for your loan application is helping your lender understand your business and the project for which you seek financing. You can do this by writing a history of your business. Here, you’ll explain when and how you founded the business, how the business has grown over the years and what major challenges and competition you’ve faced. Your narrative should also explain why you’re seeking an SBA loan and what business goals the SBA loan will help you accomplish. It should specify how much money in loan proceeds you seek along with details on how the funds will be spent.

Step 2: Include the required financial statements

All SBA loans require you to submit a profit and loss statement or earnings report that’s been updated within 120 days for 7a / 504 (180 days for an SBA Express Loan, which lets business owners receive a decision from their lender much faster, typically within 36 hours) of the date of your loan application. This gives the lender and the SBA a snapshot of your business, so you’ll also want to include a balance sheet with detailed breakdowns of assets or liabilities.

You’ll need to provide projected financial statements, which should include a full accounting of your expected income and finances for the coming year. The SBA also asks that you attach a written explanation for how you arrived at those projections — and how you expect to meet them. If you use accounting software, you can use it to generate these statements. Accounting professionals also can provide the necessary statements and schedules.

Step 3: List all ownerships and affiliations

Any business with subsidiaries, affiliates, franchises or stock holdings in other companies must include a full list of those arrangements with the loan application. Many businesses won’t have information to include here, but it’s important to be thorough: If you or any of your partners have any ownership stake in another business, it must be listed.

Businesses planning to use the SBA loan to finance business acquisitions also need to provide supplemental information on the business they plan to acquire, including:

• Profit and loss statement and balance sheet
• The most recent three years of federal income tax returns
• Purchase Agreement or Redemption Agreement, including sale terms, and statement as to why the current owner is selling
• Asking price and schedules of inventory and physical assets such as furniture, equipment and fixtures

Step 4: Copy important business documents

Your business loan application should also include copies of these documents:

• Business certificate or license
• Business and personal federal income tax returns for the previous three years
• Any previous loan applications you’ve submitted to any lender
• Personal résumés for each owner or partner
• Your current lease or a signed letter from your landlord that outlines the lease terms

These are items for SBA Eligibility, which may be requested from your lender after your loan credit approval:

Step 5: Complete the SBA 7a Borrower Information Form

Filling out Form 1919 is the first step after credit approval for an SBA 7a or Express loan (not for SBA 504). This form includes basic questions about you and any business partners, including:

• Name
• Ownership percentage in the business
• Gender, race, ethnicity and other demographic information
• U.S. citizenship status
• Details of any criminal record

The application includes a questionnaire to ensure you meet the eligibility criteria of the loan you’re applying for. Depending on your answers, you may need to file additional forms, which are listed in the application. For instance, if you plan to spend more than $10,000 on construction, you’ll need to fill out SBA Form 601. Before you begin the application, make sure you understand the types of SBA loans and their eligibility criteria.

Step 6: Attach SBA personal history forms

All business partners, who own 20% or more of the business, need to complete a Personal Financial Statement (either your lender’s form or the SBA Form 413) which is used to evaluate creditworthiness. In situations where you have an employee managing the day-to-day operations of the business they should complete the form as well. If any of the applicants has a previous criminal charge the SBA Form 912, the Statement of Personal History is required about your background and any criminal record (either felony or misdemeanor). You and your partners will need to provide a detailed accounting of your personal assets and liabilities, including real estate, stocks and bonds, and outstanding debts or tax liens.

Find out more with Chase for Business

Speak with a business banker to learn more about how Chase can help with your SBA loan application. Once you’ve applied for your loan, peruse our tips on how to adjust your spending and internal controls after you receive capital.