SBA Loans | Small Business Loans | How to Apply

In the last blog, we talked about what an SBA (Small Business Administration) Loan was and what it is used for. Today we will discuss what lenders (banks) look for when considering a loan and what you, the business owner, should prepare for and consider. We’ll also talk about how to apply for an SBA Loan.

What is the SBA (Small Business Administration)?

The SBA is a government entity set up to help small businesses succeed, create jobs, and grow their business.  It is the only fully dedicated federal agency for small businesses and provides advising, capital, disaster relief and contracting expertise. Locally, for Collin and Rockwall Counties, the SBDC is the premier expert on developing small business.  They are your local source for the most up-to-date information (and help) for small businesses.


Am I qualified to apply for an SBA Loan?

Both the Small Business Administration and the bank granting a small business loan have several qualifying factors for loan approval. Below are the primary factors that go into the bank’s decision.  Note that all factors combine to lead that bank to a decision so a shortfall in one area can often be made up for by a strength in another.

  • Credit Score: The credit scores for all the business’ owners (who own 20% or more of the business) should have a score of 720 or above. Credit scores of 680-719 will still be considered but are not ideal.
  • Collateral: While not necessarily a requirement, the presence of assets that can be pledged as collateral for a business loan will help you tremendously.
  • Investment in the business: Lenders like to see that the business owner(s) have an invested interest of 10-20% of the total projected cost for purchase or improvement. This type of “skin in the game” helps make a potential borrower more attractive to the bank or financial institution.
  • Outside Income Potential: This might include a secondary income, or means or loan repayments such as a spouse’s income, passive income from another investment such as real estate, or a structured settlement.
  • Experience in the type of business: It’s important to work or to have owned interest in the business for which you are seeking a loan.
  • A solid business plan: Is your idea for this business realistic and will it be profitable? What is the turn-around time for debt repayment?

*You can read more about preparing a business plan in October’s blog by Steve Shalosky.


How do I apply for or get an SBA Loan?

The first thing to remember when applying for an SBA loan (or even for a conventional loan) is patience. Small business loans take time, effort and paperwork but are worth the time invested to make your business successful. Here are some tips to get started:

  • Find a qualified lender: at Collin SBDC we can help you find the banks or lenders who best fit your small business needs and who can help you apply for a loan.
  • Decide which type of funding solution will be most beneficial to you for your small business needs. You have several different options:
  • Get your financial information together: You’ll need to have your business and personal tax returns ready to share with your lender as well as your personal and business (where applicable) financials.
  • Prepare a business plan with financial projections: Collin SBDC can help with this too! Click here to see if you qualify for our assistance at no cost: SBDC 


Do I really want to go through the effort of applying for an SBA loan?

Everything worthwhile comes with some effort on your part…but if you are starting or expanding a small business, you already know that. The biggest advantage of an SBA loan is that you won’t have to put up a lot of collateral. This type of loan protects your personal house, cars, retirement accounts and bank balances. Lenders are also a lot more willing to lend money when the government insures the debt, reducing the risk to the lending institution.


If you are considering buying, building or expanding a small business come see us!  At Collin SBDC, we have the top experts in Collin and Rockwall County who have proven experience and knowledge to help you succeed and develop your business.


 For additional resources on SBA loans, what banks look for and what you will need to apply for a loan, please contact us at the Collin Small Business Development Center – SBDC – serving Collin and Rockwall Counties, Texas.   


*Blog by: Alex Plotkin